You’re not alone if you run a business and still get confused when your accountant says retained earnings or double-entry. Bookkeeping is full of strange words and dry explanations. But these 35 terms shape how money moves, grows, and disappears in any business. Learn them, and you stop being at the mercy of someone else’s interpretation of your business.
1. Accounts Payable
What you owe. Bills you haven’t paid yet, money owed to suppliers, and services that have been delivered but not yet settled.
2. Accounts Receivable
What others owe you. Invoices you’ve issued that are still waiting to be paid.
3. Accruals
When you record revenue or expenses before the money changes hands. Key in non-cash businesses.
4. Assets
Everything your business owns. Cash, vehicles, equipment, inventory, if you can sell it or use it to make money, it’s an asset.
5. Balance Sheet
A snapshot of your business’s health. Lists assets, liabilities, and equity at a single moment in time.
6. Bookkeeping
The daily act of recording financial transactions. Often ignored until it’s too late.
7. Capital
Money used to run the business. It could be your own, borrowed, or from investors.
8. Cash Flow
Tracks when money comes in and goes out. Mismanage this, and profits won’t save you.
9. Chart of Accounts
Your internal index of every financial category. It organizes transactions into useful buckets.
10. Cost of Goods Sold (COGS)
Direct costs are tied to making or delivering what you sell. If they scale with sales, they belong here.
11. Credit
Increases liabilities or revenue. Balances out the double-entry system.
12. Debit
Increases assets or expenses. One side of every financial entry.
13. Depreciation
Slow loss of value from fixed assets over time. Lowers your taxable income.
14. Double-Entry Accounting
Every transaction affects at least two accounts. Ensures your books stay balanced.
15. Equity
What’s left after subtracting liabilities from assets? Your claim on the business.
16. Expenses
Money spent to operate. Includes everything from software to salaries.
17. Fiscal Year
A 12-month accounting period is not always aligned with the calendar year.
18. Fixed Assets
Items expected to provide value for years. Buildings, vehicles, major equipment.
19. General Ledger
Where all financial data gets posted. The source of truth for reports.
20. Gross Profit
Revenue minus the cost of goods sold. Tells you how efficient your core business is.
21. Income Statement
Shows profits and losses over time. Helps you analyze business performance.
22. Inventory
Raw materials, finished goods, and everything in between are significant assets in retail or manufacturing.
23. Journals
Initial records of transactions before they enter the general ledger.
24. Liabilities
Debts and obligations. What you owe to others, short and long-term.
25. Net Income
What’s left after all the expenses? The real profit number that matters.
26. Payroll
Salaries, wages, taxes, and benefits. Usually one of the largest expenses.
27. Reconciliation
The act of matching records to actual bank or financial statements. Catches errors and fraud.
28. Retained Earnings
Profits are kept in the business instead of distributed. Fuels future growth.
29. Revenue
All the money you earn before expenses. The top line of your income statement.
30. Trial Balance
Verifies that debits and credits match. A red flag detector.
31. Variable Costs
Costs that change with activity. More sales mean more materials and delivery costs.
32. Fixed Costs
Costs that stay the same regardless of activity. Rent, salaries, insurance.
33. Withholding
Tax amounts are deducted from employee wages. Legal obligation, not a choice.
34. Write-Off
Removes value from your books. It can apply to bad debts, obsolete inventory, or tax deductions.
35. Working Capital
Current assets minus current liabilities. A measure of your ability to stay liquid and meet short-term needs.
Conclusion:
Most experts talk about these terms in isolation. But their real power comes from how they connect. If your cash flow looks good but working capital is tight, you’re running a risky game. If gross profit rises but net income is flat, your expenses eat you alive. Numbers don’t lie. But if you don’t understand the language behind them, you’ll keep missing the message. Start with these terms. Know them like you know your products. That’s where financial control begins.