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The only accounting terms you’ll ever need to know

Accounts Payable — Money a business owes to others, but hasn’t coughed up yet. Think of it as an “IOU” pile.

Accounts Receivable — Money others owe to a business. It's the “waiting for the moola to roll in” pile.

Accrual — “It’s a cruel world”. jk. This means recording income and expenses when they occur, not when the cash changes hands. For example, you might get an invoice on Monday, but only pay it on Thursday.

Accrued Expenses — Costs that a business has racked up, but hasn’t paid yet.

Accrued Income — Income that a business has generated, but hasn’t been received the payment for yet. It’s like having a cheque in the mail, still yours but not in your hands yet.

Amortization — Spreading the cost of a big purchase out over time.

Assets — All the good stuff a business owns. This includes the things that it can sell or will help it make money.

Audit — A financial check-up to make sure your books aren’t shady and that you’re playing by the rules.

Balance sheet — A financial snapshot showing what a company owns (assets), what it owes (liabilities), and the owner's equity at a specific point in time.

Bookkeeping — Recording all the financial transactions of a business. It’s like keeping a diary, but for money. stub does most of this work for you.

Break-even — The point at which total income equals total costs of running a business, resulting in neither profit nor loss for that business.

Budget — A plan to manage finances by estimating the income and expenses in specific categories (like entertainment or rent expenses) over a period of time. GL with that.

Capital — The cold, hard cash (or shiny assets) you use to make big moves for your business. Like buying that Ferrari delivery truck.

Capital Expenditure (CapEx) — When your business spends bucks on stuff that’ll (hopefully) last a while—like upgrading your laptop or buying a new oven to bake more cakes.

Cash Flow — The money tango—cash cha-chas in, cash slides out. It’s the lifeblood of your business and the key to keeping the show on the road.

Chart of Accounts — All the categories that a business uses to organise and keep track of its finances.

Cost of Goods Sold (COGS) also called Cost of Sales — The cost of whipping up whatever you sell. Whether it’s the flour in your cakes or the fabric for your fashion line, this is what goes into making your money-maker.

Credit — The accounting “shrinker” for assets and expenses but a “booster” for income, liabilities, and equity. Every entry in your books needs to have equal debits and credits.

Current Assets — Assets you can turn into money faster than you can say “payday.” These bad boys are here to fund your day-to-day hustle.

Debit — The accounting cheerleader for assets and expenses, but a party pooper for income, liabilities, and equity. It’s the yin to credit’s yang.

Deferred Revenue — The “IOU” you owe to your customers. They’ve paid you, but you haven’t delivered the goods or services yet—time to make good on that promise!

Deferred Tax — The tax limbo zone: it’s not due now, but it’s lurking in your financial future thanks to timing differences in how income and expenses are accounted for.

Depreciation — What happens when your shiny new asset slowly lose its value (and sparkle) over time. Think of it as your business’ version of aging gracefully.

Dividends — Profits that a business makes that are distributed to shareholders. When your company wins, they get a juicy slice of the profit pie—yum!

Equity — Your business’ true worth. It’s what’s left when you subtract all the “IOUs” (liabilities) from everything you own (assets).

Exaccles — Exactly.

Expenses — The money you gotta spend for your business to make money. From rent to coffee runs, it’s all the cash you shell out to keep things running smoothly.

Fixed Assets — The big, shiny things you keep around for the long haul, like buildings, vehicles, or that industrial coffee machine that powers your business.

Fixed Costs — The chill expenses that don’t care how much you’re hustling. Rent, salaries, and Wi-Fi—they stay constant, whether you’re selling 10 widgets or 10,000.

Fezzy — Good times.

Liabilities — The not-so-fun baggage your business carries. Loans, bills, or “I’ll pay you back later” promises.

General Ledger — The ultimate gossip journal of your business’ money life. Every transaction, from “who paid who” to “who owes what,” gets spilled here in perfectly balanced debits and credits.

Gross Profit — Icky dirty cash (smells funky) that someone pays you with. jk. The amount of money a business makes from its sales after the direct costs associated with producing its goods or services

Income also called revenue — All the money a business makes by selling stuff.

Income statement also called a Profit & Loss — A financial report that shows how much money a business made and spent over a specific period.

Income Tax — The government’s “thank you” for your hard work, based on how much you earn.

Inventory — All the goodies a business has sitting around, either ready to sell or to be turned into something magical. It’s like the business’ treasure chest, except it’s full of products and not gold coins. (Unless you sell gold coins).

Liquidity — Your business’ superpower to turn stuff into cash fast. It’s like selling your couch on Facebook marketplace but without waiting for “Is this still available?” messages.

Long-term Liabilities — The slow-burning debts your business promises to handle... eventually. Think loans, bonds, or anything that sticks around longer than a year.

Loss — When your expenses decide to throw a party and outdo your income.

Matching Principle — A concept that states expenses should be recorded in the same period of time as the income they help to generate.

Net Profit — The amount of money a business has left over after subtracting all expenses, including operating costs, interest, and taxes, from its total revenue.

Operating Expenses (OpEx) — These are your everyday costs for making the magic happen and earning that sweet, sweet revenue.

Overhead Costs — The ongoing overhead expenses associated with operating a business that are not directly tied to producing a specific product or service.

Payroll — The grand event where employees get their cash, and you, the business owner, wave goodbye to it. Basically, it’s paying people to make the dream work.

Petty Cash — The pocket money your business keeps handy for life’s little emergencies—like running out of sticky notes or grabbing celebratory donuts.

Prepaid Expenses — The “I’ll pay now, use later” stuff, like pre-booked subscriptions or insurance.

Profit — The money left after the hustle and expenses. A.K.A the reason you’re an entrepreneur. Cha-ching!.

Reconciliation — The thrilling game of “spot the difference” between your records and your bank’s.

Retained Earnings — All the profits your business decided to keep instead of throwing a shareholder pizza party. Usually this gets put toward growing the business.

Short-term Liabilities — The bills you’ll need to pay soonish (like, within a year). Think of it as the to-do list of money you owe that’s definitely judging you.

Simple — Not hard.

Taxable Income — The slice of your income that makes the taxman drool. It’s what’s left after deducting all the legal write-offs but before the government takes its cut.

Trial Balance — The financial version of a “who’s been naughty or nice” list. It checks if all your debits and credits are playing fair or causing chaos in your books.

Un — Un, as in "un".

Variable Costs — The clingy expenses that follow your every move—sell more, they go up; sell less, they chill. Think raw materials, commissions, or your skyrocketing snack budget during crunch time.