The Accounting Glossary
Core accounting terms explained in plain language, with examples drawn from real small businesses — no accounting background needed.
Accounts payable
Accounts payable is money you owe your suppliers for goods or services you have already received but not yet paid for. It is an outstanding obligation and sits under current liabilities.
Accounts receivable
Accounts receivable is money your customers owe you for goods delivered or services performed that you have not yet been paid for. It is an asset of your business, but it is not cash in the till.
Assets
Assets are everything your business owns that carries economic value and is expected to bring future benefit: cash in the till, stock in the warehouse, equipment, and money your customers still owe you.
Balance sheet
A balance sheet is a financial report showing your business at a specific date: what it owns (assets), what it owes (liabilities), and what is left for its owners (equity). Its two sides must always balance.
Double-entry bookkeeping
Double-entry bookkeeping is the practice of recording every financial transaction in two accounts at once: one debited and one credited, for the same amount. That built-in balance is what makes the books auditable and surfaces errors automatically.
Liabilities
Liabilities are your business's financial obligations to others — everything owed but not yet paid: supplier debts, bank loans, wages payable, and taxes due.
Owner's equity
Owner's equity is what is left for the owners of a business once all liabilities are settled. It is calculated with one formula — assets minus liabilities — and represents the net value of the business.
Revenue vs profit
Revenue is the total that came in from sales before any cost is deducted. Profit is what remains after every expense is subtracted. Revenue can be high while profit is negative at the same time.
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