![]() This is the opposite of cash-basis accounting, which means you record revenue and expenses when you’ve made or received payment. If you use an accrual-basis accounting method, you’ll record accruals, both positive and negative, at the time of the sale. While accruals and accounts payable are accounting entries, accruals are entries that haven’t been realized yet (aka you haven’t received the bill or haven’t received payment from your customer). Accruals can also be sales that you’ve made, but the customer hasn’t paid their invoice or bill. AccrualsĪccruals refer to expenses that you’ve incurred but haven’t paid yet. Once the customer paid, you would debit the amount and move to your cash accounts. In the traditional accounting process, you would credit your accounts receivable with the amount owed by the customer. Accounts receivable still counts as money your business has earned since the customer will have to pay their bill. Accounts receivableĪccounts receivable refers to the money that you haven’t received yet from your customers for either your product or service (think of unpaid invoices). ![]() Accounts payable is categorized as a liability because it’s technically debt. You record on your balance sheet the amount that you haven’t paid yet to vendors and suppliers. In other words, your short-term, unpaid bills for which you’ve already been charged. Accounts payableĪccounts payable refers to the money that you currently owe vendors or suppliers. Come tax season, you have all the documents you need to file. With Neat, you can manage your accounts year-round. The length of time for an accounting period is normally one year, which means you gather all of your transactions and reconcile them with your bank statements for that year. ![]() You record and report business transactions and turn them into financial statements. Accounting periodĪn accounting period is the time it takes to complete an accounting cycle. These accounts go into your general ledger, which is then used to create your financial statements (e.g., your profit and loss statement). You can have a number of accounts, such as revenue and expense accounts. You group different business transactions under different types of accounts (also known as journals). AccountsĪccounts refer to the record of financial transactions for your business, whether income or expenses. In this article, we define 23 common bookkeeping terms into plain English and break down what they mean in terms of your bookkeeping process (and tell you whether they’re necessary) so you can manage your books with confidence. It’s added pressure on top of an already complicated and overwhelming process. Unless you have a background in accounting, the majority of bookkeeping terms seem like jargon and can be confusing.įrom “general ledger” to “chart of accounts,” these terms require small-business owners to spend time researching just to reconcile their books.
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