Glossary
Bookkeeping terms, in plain English
Short, plain definitions of the bookkeeping, tax and outsourcing terms you'll meet when you work with a bookkeeper, or when your CPA firm outsources work, put together by SF Business Solutions.
- Accounts payable
- Money your business owes to vendors for bills it has received but not yet paid. More →
- Accounts receivable
- Money customers owe your business for invoices you have sent but not yet been paid. More →
- Accrual basis
- An accounting method that records income when you earn it and expenses when you incur them, whether or not cash has changed hands yet. Lenders and investors usually expect accrual-basis statements.
- Accrued expense
- An expense you have incurred but not yet paid or been billed for, such as wages earned at month end. Recording it gives a truer picture of the month.
- Balance sheet
- A report of what your business owns (assets), what it owes (liabilities) and what is left for the owners (equity) on a specific date.
- Bank reconciliation
- Matching every transaction in your books to your bank statement so the two balances agree. Any difference is a missing, duplicated or wrong entry to find and fix. More →
- Bookkeeping cleanup
- Fixing books that exist but are wrong: miscategorized transactions, duplicates, unreconciled accounts and incorrect opening balances. More →
- Cash basis
- An accounting method that records income when money comes in and expenses when money goes out. It is simpler than accrual basis and common for very small businesses.
- Cash flow statement
- A report of how cash moved in and out of the business over a period, split into operating, investing and financing activities. It explains why profit and cash in the bank are different.
- Catch-up bookkeeping
- Recording months or years of transactions that were never entered, so the books become current. More →
- Chart of accounts
- The list of categories your books use to sort every transaction, such as revenue, rent, payroll and loans. A clean chart of accounts makes reports readable and tax prep faster.
- Client accounting services
- Often shortened to CAS. The bookkeeping, payroll, reporting and advisory work an accounting firm does for clients through the year, as opposed to tax returns alone. More →
- Cost of goods sold
- The direct cost of the products you sold in a period, such as materials and inventory. Revenue minus cost of goods sold is gross profit.
- Deferred revenue
- Money a customer has paid for goods or services you have not delivered yet. It sits on the balance sheet as a liability until you earn it.
- Depreciation
- Spreading the cost of a long-lived asset, such as equipment or a vehicle, over the years it is used, instead of expensing it all at once.
- Estimated tax payments
- Quarterly payments of income tax made during the year by people and businesses without enough withholding. The federal due dates are April 15, June 15, September 15 and January 15.
- Form 1065
- The federal information return for partnerships, including most multi-member LLCs. For a calendar-year partnership it is due March 15. More →
- Form 1099-NEC
- The IRS form businesses use to report payments to non-employees, such as independent contractors, above the reporting threshold. It is due to the recipient and the IRS by January 31. More →
- Form 1120-S
- The federal income tax return for S corporations. For a calendar-year company it is due March 15. More →
- Form 941
- The employer's quarterly federal tax return, reporting income tax withheld from wages and the Social Security and Medicare taxes owed. More →
- Form W-2
- The form employers give each employee, and file with the government, showing wages paid and taxes withheld for the year. It is due by January 31. More →
- Form W-9
- A form a vendor or contractor gives you with their legal name and taxpayer ID number. You need it to file their 1099.
- Fractional CFO
- A part-time chief financial officer who handles forecasting, planning and financial strategy for a business that doesn't need a full-time one. More →
- General ledger
- The complete record of every transaction in your books, organized by account. Your financial statements are built from it.
- Job costing
- Tracking income and costs by job or project, so you can see which jobs make money. Common in construction and professional services.
- Journal entry
- A manual entry in the books that records a transaction or an adjustment, such as depreciation or an accrual, with equal debits and credits.
- Month-end close
- The routine of finishing a month's books: recording everything, reconciling every account, making adjustments and producing the financial statements. More →
- Offshore staffing
- Hiring accountants in another country who work as a dedicated part of your team, usually through a provider that employs them. More →
- Owner's draw
- Money an owner of a sole proprietorship, partnership or LLC takes out of the business for personal use. It is not a business expense.
- Profit and loss statement
- Also called an income statement. It shows revenue, expenses and the resulting profit or loss over a period, such as a month or a year.
- PTIN
- Preparer Tax Identification Number. Anyone who prepares, or helps prepare, federal tax returns for pay must have one from the IRS. More →
- QuickBooks ProAdvisor
- Intuit's certification program for accounting professionals who work in QuickBooks. Certified ProAdvisors have passed Intuit's exams for the product. More →
- Retained earnings
- The profits a business has kept over time rather than paid out to owners. It appears in the equity section of the balance sheet.
- Revenue recognition
- The rules for when revenue counts as earned. Under the US standard, ASC 606, revenue is recognized as you deliver what the customer paid for, which matters for subscriptions and long projects.
- Sales tax nexus
- A connection to a state, such as an office, employees or enough sales there, that requires your business to collect and remit that state's sales tax.
- Schedule C
- The part of Form 1040 where sole proprietors and single-member LLCs report their business income and expenses. More →
- Section 7216
- The part of the US tax code that limits how tax return preparers may use or disclose clients' tax information. Among other things, it generally requires the client's written consent before their return information goes to a preparer outside the United States. More →
- White-label bookkeeping
- Bookkeeping done by an outside provider but delivered under an accounting firm's own name. The firm's clients deal only with the firm. More →
- WIP schedule
- A work-in-progress schedule. Construction companies use it to compare what they have billed on each job with the work actually completed, showing where they are over- or under-billed.
How the terms are chosen
These are the words that come up on consults and in our monthly reports. Where a term links to one of our service pages, that page explains how we handle it.
What's the difference between a bookkeeper and an accountant?
A bookkeeper records and reconciles transactions and keeps the books current. An accountant, or a CPA, analyzes them, prepares returns and advises. Many small businesses need both, and SF Business Solutions does both: monthly books, and the tax return prepared and filed.
What is accrual-basis bookkeeping?
Recording income when you earn it and expenses when you incur them, not when cash moves. Lenders and investors usually expect it.
What is a month-end close?
The routine of finishing a month's books: recording everything, reconciling every account, making adjustments and producing financial statements.
What is white-label bookkeeping?
Bookkeeping done by an outside provider but delivered under an accounting firm's own name, so the firm's clients deal only with the firm.
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