7 Accounting & Bookkeeping terms every small business owner should know

Every small business owner whether you are selling a product or service to your clients should have some basic accounting and bookkeeping knowledge. Understanding the basic terminology puts you on track to running a financially healthy business.

1. Bookkeeping:

Bookkeeping is the task of recording and tracking a business’s financial transactions. Examples of financial transactions include, paying a web designer to design your website, purchasing a domain name for your website or paying the monthly rent for office space. These are just a few of the many many many financial transactions a small business may encounter during a fiscal period.

2. Accounts Payable:

Accounts payable is money you owe to vendors or creditors. These vendors can be another business or individual that you do business with.

3. Accounts receivable:

Accounts receivable is money owed to you by your customers or clients. Typically receivables are expected to be paid within 30 days of the invoice date. It is common for small business owners to give customers a cash discount to encourage sales or encourage prompt payment.

4. Assets:

An asset is anything of value owned by the business. Examples of valuable can include inventory, computers, real estate or equipment.

5. Liabilities:

Liabilities are debts or amounts owed by the business. Examples of liabilities can include accounts payable, business loans or mortgages.

6. Balance Sheet:

Balance sheet is a financial statement which reports a business’s assets, liabilities and owners’ equity.

7 .Profit & Loss AKA Income Statement

The P&L is a financial statement which reports a business’s income and expenses. A P&L statement should be generated and reviewed at least at the end of every quarter.