Simple Glossary: Common Accounting Terms
Not everyone speaks accountant. This quick glossary helps you make sense of financial reports, meetings, and IRS letters — without the jargon.
📘 Common Terms Explained:
- Accrual Accounting: Records income when earned and expenses when incurred — not when cash changes hands.
- Accounts Payable (AP): Money you owe vendors or suppliers.
- Accounts Receivable (AR): Money customers owe you.
- Depreciation: Reduction in value of an asset over time (used for tax purposes).
- Equity: Ownership value in the business (what’s left after liabilities).
- Net Income: Your profit — revenue minus expenses.
- P&L (Profit & Loss Statement): Shows income and expenses over a period of time.
- Balance Sheet: Snapshot of assets, liabilities, and equity at a specific point in time.
- Cash Flow: Tracks the movement of money in and out of your business.
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