Common Accounting Terms
Now that I don’t work in a corporate setting, I forget that the accounting terms I use are sometimes foreign to the general public. So here’s a shortlist of a few popular ones.
A/P (Accounts Payable) is another way of talking about the unpaid invoices your company has outstanding for goods or services you have already received.
A/R (Accounts Receivable) is all the invoices you have billed for your goods or services that have not been paid to you. Keep an eye on this. You have already done the work; make sure you get paid.
GAAP (Generally Accepted Accounting Principles) are the accounting standards set forth by an accounting board, so transactions are recorded and reported the same way for any company. These rules are US-based. If you deal with international companies – they follow IFRS (International Financial Reporting Standards).
If you hear me say “those transactions wash,” that means we have one positive and one negative amount that clears or cancels each other out. Example: You purchase office supplies on your credit card for $25.94. Then you return the item the next day, and they give you back $25.94 as a refund. That’s a wash.
”Everything ties” I use this term when I’m doing bank or account reconciliations, and I have everything balanced or cleaned up.
COA (Chart of Accounts) is a list of accounts that you create for your business so we can post transactions. Those transactions build your Balance Sheet and Profit & Loss report.
G/L (General Ledger) is a report that lists EVERY transaction in your books and tells you which account it was posted to.
J/E (Journal Entry) is a manual entry that will post transactions into your books that may have been missed through your bank account or other entries needed, such as depreciation or prepaid expenses.
A reclass is a journal entry that corrects transactions that were posted incorrectly to the general ledger accounts.
Employee vs. Contractor – People use these two terms interchangeably. The employee has taxes deducted and gets a W-2. They usually have set hours they need to work in an office or online. A Contractor operates based on projects. They will invoice the company, taxes are not withheld, and they receive a 1099-NEC at the end of the year.
Debit – it just means the left side of an entry
Credit – it just means the right side of an entry
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