Online bookkeeping systems make it easier for businesses to track financial activity, organize records, and review reports in real time.
But if you’re new to bookkeeping, the terminology used in accounting software and financial reports can feel unfamiliar at first.
This glossary explains some of the most common online bookkeeping terms so you can better understand how your financial records are organized and managed.
Accounts Payable (AP)
Money a business owes to suppliers or vendors for goods or services that have been received but not yet paid for.
Accounts Receivable (AR)
Money owed to a business by its customers for products or services that have already been delivered.
Accrual Accounting
A method of accounting where income and expenses are recorded when they are earned or incurred, regardless of when the cash is actually received or paid.
Assets
Resources owned by a business that have economic value, such as cash, equipment, inventory, or property.
Balance Sheet
A financial statement that shows a business’s assets, liabilities, and equity at a specific point in time, providing a snapshot of its financial position.
Bank Reconciliation
The process of comparing your bookkeeping records to your bank statement to confirm that all transactions match and balances are accurate.
Bookkeeping
The day-to-day recording of financial transactions, including sales, purchases, payments, and receipts.
Cash Accounting
An accounting method where income and expenses are recorded only when cash is received or paid.
Many smaller businesses begin with cash accounting because it is simpler to manage.
Chart of Accounts
A structured list of all financial accounts used in a bookkeeping system to organize and categorize transactions.
Cost of Goods Sold (COGS)
The direct costs associated with producing goods or delivering services, such as materials, labor, or production-related expenses.
Credit
An accounting entry that increases liabilities or equity and decreases assets, depending on the transaction.
Credits always work together with debits in double-entry accounting.
Debit
An accounting entry that increases assets or expenses and decreases liabilities or equity, depending on the transaction.
Depreciation
The gradual reduction in the value of a long-term asset over its useful life, such as equipment or vehicles.
Double-Entry Accounting
An accounting system where every transaction affects at least two accounts — one debit and one credit — helping maintain balanced financial records.
Equity
The owner’s remaining interest in the business after liabilities are subtracted from assets.
Expense
Costs incurred by a business while generating revenue, such as rent, software subscriptions, payroll, or utilities.
General Ledger
The central record of all financial transactions in a bookkeeping system, organized by account.
Income Statement
A financial report that summarizes a business’s revenue, expenses, and profit or loss over a specific period of time.
Invoice
A document sent to a customer requesting payment for goods or services provided.
Invoices typically include the amount due, payment terms, and due date.
Journal Entry
A record used to document a financial transaction, showing both the debit and credit sides.
Liabilities
Financial obligations a business owes to others, such as loans, unpaid bills, or credit balances.
Net Income
The profit remaining after all expenses have been deducted from revenue.
This is often referred to as the business’s bottom line.
Payroll
The process of paying employees, including tracking hours, calculating wages, and withholding taxes.
Profit and Loss Statement (P&L)
Another name for the income statement, which shows revenue, expenses, and profit or loss over a period of time.
Reconciliation
The process of comparing records from two sources (such as bookkeeping records and bank statements) to ensure they match.
Revenue
The total income generated by a business from the sale of goods or services before expenses are deducted.
Trial Balance
A report that lists the balances of all accounts in the general ledger to confirm that total debits and credits are equal.
Final Thoughts
Understanding common bookkeeping terms makes it easier to read financial reports, communicate with accountants or bookkeepers, and stay organized as your business grows.
While this glossary doesn’t cover every accounting term, it includes many of the most common concepts used in online bookkeeping systems and financial reporting.