Here are the terminologies you often hear from your bookkeeper, accountant or more experienced business owners. Once we have broken it down to its more simpler definition, it would be easier for you to understand. It would also help you get a hold of the important information based on the words and their definition.
Accounting Period: Is a time period in which financial information is being tracked.
Accounts Payable: Is money owned by a business to its creditors. When you buy something that needs to be paid back quickly.
Accounts Receivable: Is money that is owed to you for your products and services rendered to customers.
Arrears: An overdue and unpaid money you owe or owed from you.
Assets: Everything that is owed by the business that is being used to run it. Equipment, Building, Vehicles and Cash are some examples.
Balance Sheet: A report which breaks down your business’ financial situation. It includes the assets, liabilities and the capital of the business. Overall, a balance sheet helps to show what your business owns and owes.
Billing: Basically an invoice. You send this to your customers for services or goods that they have purchased from you.
Bookkeeping: The process of keeping records of the financial affairs of your business.
Budget: This is an estimate of how much your business will earn which outlines how the money will be spent in the coming year. Some also call it as a Financial Planning.
Capital: Money which is personally owned by the business owner to start the business.
Cash flow/Cashflow: The coming and going of money in the business.
Chart of Accounts: When categorizing financial transactions which includes assets and liabilities, income, expenses, equity, sold goods costs and expense.
Closing Balance: At the end of the accounting period, whether monthly or yearly reported, the amount of money that stays in your account will be recorded even if you are in the negative.
Costs of Goods Sold: A direct money that is being spent on making or buying goods or services the business plans to sell to the customers.
Creditors: What you call the people or businesses that your company owes money to.