Accounting Terms You Should Know
To properly record and manage your accounting through QuickBooks it’s important to know some basic terms.
Chart of Accounts – It’s a list of categories also referred to as General Ledger accounts that are organized on a report to represent all the different classifications or ways of how your business uses or generate money. Every financial transaction will fit into some descriptive category which is listed on the “Chart of Accounts”.
Terms – Is the length of time specifying when a bill or an invoice is due to be paid.
Accrual Basis Accounting – This term represents the basic accounting principle of reporting income on all sales, collected and still unpaid and reporting expenses on the total of bills paid and still owed.
Cash Basis – You report income only on sales actually collected and report expenses only on the portion you paid out.
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Asset – These are tangible or intangible economic resource that the company owns which can be converted to cash. In QuickBooks there are Current Assets which are less than 12 months, such as a short CD and Other Assets which are longer than 12 months such as a Note Receivable. There are also Fixed Assets which refer to tangible items like computers and equipment.
Liabilities – These are your company’s financial obligations.
Equity – A representation a company’s worth which is found by deducting liabilities from assets.
General Journal Entry – These are entries usually reserved for accountants to record adjustments which cannot be easily recorded in QuickBooks.
Item Receipt – Functionality within QuickBooks to record the receipt of inventory without a bill.
Average Cost of Inventory – QuickBooks uses this method to figure out the average cost of inventory purchased and sold.
Non-Inventory Part – Items you purchase for resale but don’t track as inventory.
Job – This is a term QuickBooks software uses to classify separate projects or work-related activities for the same customer. Jobs can be used to represent properties, projects, legal cases and more.
Reconcile – This is a method for ensuring that your and the bank’s balances agree. In QuickBooks you can easily reconcile by downloading transactions directly from the bank.
Sales Receipt – A cash sale where payment is made during the transaction.
Customer Statement – A record showing all the invoices and payments made for a specific date range along with the money owed allocated to different aging periods.
Accounts Payable (A/P) – Money you owe to your suppliers and vendors.
Accounts Receivable (A/R) – Money you are owed by your customers.
Vendor – In QuickBooks this term refers to anyone you make payments to other than business owners, partners, employees or customers.
Cash Flow – A measurement representing net cash left over from incoming funds and outgoing funds. QuickBooks offers a couple of different ways to assess cash flow.
Profit / Loss Statement – A report also called Income Statement which shows the net difference between sales and expenses. It can be generated on accrual or cash basis.
Balance Sheet – A report representing the financial net value of assets owned by a business.