When starting your business, you may not be familiar with some bookkeeping terms. This new series, which I will be publishing periodically, will share some words you should know to help you stay up to date on your small-business bookkeeping. As of 2026, I added more bookkeeping terms to help you.
Visit our other Social Media Terms Business Startups need to know.
Bookkeeping Terms
What is Adjusted Gross Income
The first term means the gross income of an individual, minus
1. Business expenses.
2. Any deductions allowed for income-producing property
3. Certain losses from sales or exchanges of property
4. Self-employment expenses
5. Moving expenses
Click here for more information from the IRS.
What is a Balance Sheet Report
It is a statement of a business’s financial condition as of a specific date, showing its assets, liabilities, and capital.
Visit FreshBooks for more information on a Balance Sheet.
Note, this is not a P&L report. A P&L report shows you the current cash-in and out totals, which help you determine the source and destination of your cash. Check out our How to Show Income Breakdown on a Profit and Loss Report post that shows you how to add income to this report.
What are Accounts Payables?
Accounts payable are current liabilities owed to others; these items can be paid monthly, quarterly, yearly, or at irregular intervals.
Some accounts payable expenses are the following, but don’t include payroll.
Cleaning Services
Staff uniforms
Office Supplies
Legal fees
Supplier invoices
Contractor payments
How do you track accounts payable(AP)
You can easily track accounts payable via a paperless bill sent to a particular email address, or you can receive physical paper copies.
When you enter the transactions in an app like Quicken (affiliate) or QuickBooks, or FreshBooks (affiliate), include the invoice number, due date, and payee’s name exactly as it appear on the invoice. When you revisit or search for an invoice in your app, you can enter the name on the statement, and it will help you gather all the transactions you need.
Accounts payable will appear on the balance sheet under current liabilities section.
What is good and not so good when reviewing accounts payable?
When looking at your Balance sheet, compare this period to the last period. If the total number of accounts payable is higher than in a prior period, the company will buy more of the goods and services it needs on credit. If the total amount of AP is lower, the company pays more with cash than credit.
What are trade payables?
Trade payables are for the money a company owes its vendors for inventory-related goods. Business supplies and materials are tracked under inventory.
Visit our other Accounts Payable Tips Every Owner Needs to Know for more tips.
What are Accounts Receivable?
Accounts receivable (AR) is another bookkeeping term a business should know. It is the opposite of Accounts Payable. Accounts receivable are the balance of money due to the company from customers who haven’t paid yet. It is generated when the company allows a buyer to purchase goods or services on credit. Accounts receivable are current assets. You can use this number to help borrow money from banks.
Where can you find Accounts Receivable(AR)
AR totals are on your balance sheet. They are booked as assets because they are money owed to you.
Visit our 9 things every owner needs to know about accounts receivable for tips.
What is an Asset?
An asset is a thing with economic value that a company has. Assets are reported on your company’s balance sheet and increase your business’s value. There are several types: Current, Fixed, Financial, and Intangible.
Some examples of business assets are vehicles, buildings, machinery, equipment, bank accounts (checking and savings), and accounts receivable.
There are four types of assets. Below is a brief description of each one.
Current assets: resources that can be converted into cash or consumed within one year. Cash and cash equivalents, accounts receivable, inventory, and prepaid expenses are examples of current assets.
Fixed assets are resources with a lifespan longer than a year. This could be equipment and buildings. This is where depreciation may come into play. Ask your accountant about depreciation on your fixed assets.
Financial Assets: This may not be for your business, but it includes stocks, bonds, equity, and other securities.
Intangible assets(non-physical) are resources that have no physical presence. Examples include patents, trademarks, copyrights, royalties, etc.
What is a Liability?
And lastly, liability is on the bookkeeping terms you should know.
Liability refers to the money small businesses owe suppliers. You will have liabilities if you borrow or pay using a credit card. Note: If you pay off the credit card before the end of the month, it will not be a liability.
Some examples of liabilities include mortgages, business loans, wages owing, salary owing, interest payable, sales tax payable, lawsuits payable, debt payables, and balances owed to credit card accounts.
What types of liabilities are there
Long-term liabilities are financial responsibilities that will be repaid in more than a year.
Short-term liabilities are liabilities that must be repaid within 1 year.
Where are liabilities shown on my reports?
Liabilities are on a balance sheet. Usually, there are short and long-term liabilities.
Update 2026: And, here are some additional terms you may want to know.
What is a General Ledger?
The master record of all financial transactions. Usually found in your bank account section. It is laid out like a paper checkbook.
What is a chart of accounts?
It is an organized list of all accounts used to categorize transactions from automobile to office equipment. You can create this list exactly the way you want it. Or you can use the already-determined accounts. Note: people interchangeably use accounts and categories, well, at least I do =).
What is a Journal Entry?
This is how transactions are recorded in bookkeeping software. It is something your accountant and bookkeeper may use to adjust amounts or errors that occurred during the year.
What is reconciliation?
It is a task when you match up each transaction/deposits/fees/etc… with your bank statement. The bank statement is usually under documents and statements, and it comes out each month. You should always download it and print a copy. This is also used for backup paperwork for your tax return if you ever get audited. This is crucial for keeping your books accurate.
Well, there you have it; you should know these bookkeeping terms. All of them are on the balance sheet. Contact your accountant for more questions.
Do you need help with your Bookkeeping, Accounts Receivable, and Payables? Check out my services here and contact me today. I service Pennsylvania, U.S.A.
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