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Accounting Definitions

Bookkeeping lingo defined and accounting questions answered.

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Accounting 101

No matter what size your business, understanding the basics of accounting is incredibly useful. Accounting is simply the process of recording, analyzing, and interpreting a business’s...
 

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Accounting Software

Accounting software is a type of computer software used by business owners and accounting specialists to perform bookkeeping and accounting operations...
 

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Accounts Payable

An accounts payable (AP) entry indicates a company's obligation to pay off debts to its suppliers or creditors within a given period in order to avoid default...
 

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Accounts Receivable

The accounting term “accounts receivable” specifies “accounts” a business is entitled to receive because it delivered a service or goods. In other words, it is the exact opposite of accounts payable and represents...
 

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Accrual Based Accounting

Unlike the cash accounting method, which records economic events only when cash is exchanged, accrual accounting entails revenue and expenses being recorded...
 

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Balance Sheet

A balance sheet is a financial statement that provides a snapshot of what a business owns and owes, as well as the amount invested by shareholders...

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Benefits

Benefits play a major role in the workplace, representing anything given to an employee beyond their wage or salary. Typically, 30% of an employee’s compensation comes from benefits and they are often seen as a key indicator of...
 

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Cash-Based Accounting

Cash accounting is the method where a business records revenue and expenses at the time they are actually received or paid, not in the period in which they were incurred...
 

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Cash Flow Statements

A cash flow statement is just what it sounds like: an indication of the cash generated or used by a company in a given period. Cash flow statements set out a company’s cash sources and are used in three categories...
 

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Chart of Accounts

Think of a chart of accounts (COA) as a filing cabinet where all a company’s financial transactions are stored and a complete listing of all the accounts that are currently in use are kept. It is divided between accounts...
 

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Class Tracking

Businesses that want to get a more detailed view of their finances can use class tracking to determine which areas of the business are doing well and which need improvement. It lists income and expenses that are broken down...
 

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COGS

One of the most important business accounting terms, COGS is the acronym for the cost of goods sold and represents the total cost required for a company to produce a product or deliver a service, including labor and materials...
 

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Credits and Debits

All business transactions have a monetary impact on the financial statements and the bottom line of an organization. When accounting for these transactions, a company records the numbers in two accounts, a debit column...
 

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Contractor vs. Employee

Independent contractors are self-employed, while employees perform services that can be controlled by an employer (what will be done and how it will be done). The employer has the legal right to control the details of how the services...
 

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CPA, Controller, CFO

Quick definitions: A CPA is a Certified Public Accountant. A Controller is responsible for all accounting-related activities within an organization. A CFO is the Chief Financial Officer, responsible for all financial actions of a company...
 

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Deferred Revenue

Also known as prepaid revenue or unearned revenue, deferred revenue is the monies received by a business in advance of having earned it. That is, deferred revenues are not yet income and so cannot be reported on the...
 

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Depreciation Schedule

A depreciation schedule or chart helps businesses keep track of long-term assets and gives a look at how they’ll depreciate over time. It calculates an asset’s depreciation expenses based on the date of purchase, initial cost...
 

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Financial Reviews

A financial review is performed to ensure no material changes are needed to bring a company’s financial statements into compliance within an applicable financial reporting framework such as GAAP. Accountants look at...
 

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GAAP

GAAP stands for “generally accepted accounting principles” and is used by businesses to Properly organize their financial information into accounting records, summarize the accounting records into financial statements...
 

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How to Calculate Income

Calculating income is essentially deducting costs and expenses from profits. It starts by calculating the total amount of sales made during accounting and is followed by deductions for certain costs or other operating expenses...
 

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Modified Adjusted Gross Income

Modified adjusted gross income (MAGI) determines an individual’s eligibility for important tax benefits, including whether they can contribute to an IRA or deduct contributions to an individual retirement account...
 

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Profit & Loss Report

All companies must generate revenue to stay in business. It is used to pay expenses, taxes to local, state, and federal governments, and interest payments on debt. Once the costs of doing business are paid, what's leftover is called...
 

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Double-Entry Accounting

coming soon

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Retained Profits

coming soon

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Gross Profit

coming soon