Glossary

1

179 Expense Deduction

This tax rule lets small business owners deduct the full cost of qualifying equipment or software purchased for their business in the year it’s bought, instead of spreading the deduction over several years. It’s a helpful way to...

8

83(b) Election

A tax option that lets you pay taxes on the value of company shares or stock options when they are first granted, rather than when they fully belong to you later. This is especially useful for startup founders and employees, as...

A

Accounts Payable

Money a business owes to its suppliers for goods or services received but not yet paid for; this is a key part of core accounting, helping track what needs to be paid and when.

Accounts Receivable

Money owed to your business by customers for goods or services you’ve already provided, but haven’t been paid for yet. This is a key part of core accounting, helping you track what income is still expected to come in.

Accrual Basis Accounting

This method records income and expenses when they are earned or incurred, not when cash changes hands. It gives a more accurate picture of your business’s financial health by matching revenues to the periods in which they are...

Adjusting Journal Entries

These are updates made to your business’s accounting records at the end of a period to make sure all income and expenses are recorded in the right time frame. This step is part of regular accounting tasks and helps ensure your...

AICPA

The main organization in the United States that sets standards and provides resources for certified public accountants (CPAs), helping accounting professionals maintain high ethical and professional standards when working with...

Amortization

Spreading out the cost of an asset or a loan over a set period of time, so you can track expenses or payments in smaller, regular amounts. This process is a key part of core accounting, helping businesses manage finances and...

AR Aging Report

A tool that helps you see which customers owe your business money, how much they owe, and how long their invoices have been unpaid. This report breaks down outstanding payments by time periods (like 30, 60, or 90 days overdue)...

Asset

Something valuable owned by your business, like cash, equipment, or inventory, that can help generate income or support operations. In Core Accounting, assets are tracked to show what your business owns and their value on your...

B

Balance Sheet

A financial statement that shows what a business owns (assets), what it owes (liabilities), and the owner’s equity at a specific point in time. It’s one of the main accounting reports used to understand the financial health of a...

Bank Reconciliation

A process that compares your business’s financial records with your bank statement to make sure they match, helping you spot errors or missing transactions. This is an important part of regular accounting tasks to keep your...

Bank Statement

A summary of all transactions in a business’s bank account over a specific period, showing money coming in and going out. This document helps small business owners track their finances and is an important type of accounting...

Bill

A bill is a document that shows how much your business owes to a supplier for goods or services received. It’s a type of accounting document used to keep track of what you need to pay and helps you manage your expenses and cash...

Bill Payment

A process where a business pays money it owes to suppliers or service providers, usually based on invoices or other accounting documents that show what is due. This helps keep track of expenses and ensures all bills are paid on...

Bookkeeping

The process of recording and organizing all the financial transactions of a business, such as sales, expenses, and payments. It is a key part of core accounting, helping business owners keep track of their money and make...

Bootstrapping

Using your own money or the business’s earnings to fund and grow a company, instead of relying on outside investors or loans. This approach is common for startups that want to stay independent and control their business...

Business Income Tax

This is a tax paid on the profits a business earns from its regular operations. It’s one type of business tax, which also includes things like sales tax and payroll tax. Business income tax is usually calculated based on the...

C

Cash Basis Accounting

Records income when money is actually received and expenses when they are paid, rather than when they are billed or incurred. This simple method is often used by small businesses and is one of the main approaches in core...

Cash Conversion Cycle

This is a measure of how long it takes for a business to turn its investments in inventory and other resources into cash from sales. It helps small business owners understand how quickly they can recover cash spent on supplies...

Cash Flow Statement

A financial report that shows all the money coming in and going out of a business over a certain period, helping you see how much cash is available to pay bills and invest in growth. This is one of the main accounting reports...

Chart of Accounts

A list that organizes all the accounts a business uses to record its financial transactions, such as sales, expenses, assets, and liabilities. This tool helps keep financial records clear and organized, making it easier to...

Common Stock

Shares that represent ownership in a company, giving holders the right to vote on company matters and receive a portion of profits if dividends are paid. Issuing these shares is a common way for businesses to raise money, and...

Contractor

A contractor is an individual or business hired to perform specific work or services for your company, usually for a set period or project, rather than as a regular employee. In Core Accounting, payments to contractors are...

Corporation

A corporation is a type of business that is legally separate from its owners, meaning it can own property, make contracts, and be responsible for its own debts. Owners are usually protected from being personally liable for...

Cost Basis

The original value of an asset, such as equipment or inventory, used to determine profit or loss when the asset is sold. This amount is important in core accounting because it helps track how much was spent on business assets...

Cost of Goods Sold

This is the total cost a business pays to produce or purchase the products it sells, including materials and direct labor. It’s a key part of Core Accounting because it helps determine how much profit your business makes from...

Credit Card Reconciliation

Matching and verifying credit card transactions with your business records to ensure everything is accurate and accounted for; this is a common part of accounting tasks to help spot errors, prevent fraud, and keep your financial...

Credit Note

A document issued by a seller to a buyer to correct or reduce the amount owed on a previous invoice, often due to returned goods or an overcharge. It is one of several common accounting documents used in business to keep...

Customer

A person or business that buys goods or services from you. In Core Accounting, customers are tracked so you can manage sales, invoices, and payments easily.

D

Delaware C-Corp

A type of company formed in the state of Delaware that is recognized for its flexible laws and business-friendly environment. This structure separates personal and business assets, offers potential tax benefits, and is popular...

Depreciation

A decrease in the value of an asset over time, usually due to wear and tear or becoming outdated. This concept is important in core accounting because it helps small business owners spread out the cost of expensive items, like...

Dividend

A payment made to company shareholders, usually from profits, as a reward for their investment. In Core Accounting, dividends are recorded as distributions of earnings and reduce the company’s retained earnings.

Dual-Entry Accounting

A bookkeeping method where every financial transaction is recorded in two places—once as a debit and once as a credit—to keep accounts balanced and accurate. This system is a key part of core accounting practices, helping small...

E

E-Commerce

Buying and selling products or services online using websites or apps, allowing customers to shop and pay over the internet. Online sales and payments are tracked and managed through your business’s core accounting system,...

Enrolled Agent (EA)

A tax expert licensed by the IRS to represent individuals and businesses in tax matters, including filing returns, handling audits, and resolving tax issues. This professional has passed a comprehensive exam and meets strict...

Estimate / Quote

A document that gives an approximate calculation of the cost for a product or service before any work begins. It helps customers understand what to expect and allows businesses to set clear expectations. This type of document is...

Expense Receipt

A record that shows proof of a business purchase or payment, usually including details like the date, amount, and what was bought. This type of paperwork is important for tracking spending and is one of several accounting...

F

Fixed Assets

Items like buildings, vehicles, equipment, and furniture that a business owns and uses for more than a year to help run its operations are considered fixed assets. In core accounting, these are important because they are...

Formation Expenses

Costs that a business pays when it is first set up, such as legal fees, registration charges, and other initial expenses needed to officially start operating. These expenses are important for meeting business compliance...

G

General Ledger

A record-keeping system that organizes all of a business’s financial transactions in one place, making it easy to track money coming in and going out. This tool is a key part of core accounting, helping you see the overall...

Gross Profit

The amount of money a business makes from sales after subtracting the direct costs of producing its goods or services. This figure helps you see how much is left to cover other expenses and is a key part of core accounting...

H

Head of Household

A special tax filing status for individuals who are unmarried and financially support a dependent, such as a child or relative. This status can provide lower tax rates and a higher standard deduction, which may reduce the amount...

High-Low Method

A simple way to estimate how costs change with activity levels by looking at the highest and lowest activity periods. This method helps small business owners separate fixed and variable costs, making it easier to understand...

I

Income Statement

A financial report that shows a business’s sales, expenses, and profit or loss over a specific period of time. This report helps you see how much money your business is making or losing and is one of the main types of accounting...

Initial Public Offering (IPO)

When a private company first sells its shares to the public on a stock exchange to raise money for growth, this process is called an IPO. It’s a common way for startups to get funding, expand their business, and allow early...

International Business

Foreign businesses with activities in the US or domestic businesses with activities outside of the US.

International Business

Doing business with customers, suppliers, or partners in other countries, including buying, selling, or working together across borders. Understanding this is important because it affects how you track sales, expenses, and...

Inventory Turnover

A measure of how many times a business sells and replaces its stock of goods during a certain period, showing how efficiently inventory is managed. This is an important concept in core accounting because it helps small business...

Invoice

A document that lists goods or services provided, the amount owed, and payment details. It is used to request payment from customers and is an important part of accounting documents that help track business transactions.

Invoice Payment

A payment made by a customer to settle the amount owed on an invoice for goods or services received. This process is an important part of managing accounting documents, which help track all business transactions and ensure...

J

Journal Entry

A record of a business’s financial transaction, showing what was spent or earned and which accounts were affected. Used as part of accounting tasks to keep track of money coming in and going out, helping ensure accurate...

Just-In-Time Fulfillment

A method where products or materials are delivered exactly when they are needed, reducing the need to keep extra inventory on hand. This approach helps small businesses save money and space, and it connects closely with core...

K

Key Employee

A key employee is someone in your business who has a major impact on its success, such as a top manager or someone with special skills or responsibilities. In Core Accounting, identifying key employees helps you track important...

Key Performance Indicator (KPI)

A measurable value used to track how well a business is achieving important goals, such as sales growth or customer satisfaction. In the context of core accounting, it helps monitor financial health by showing progress in areas...

L

Landed Cost

The total price a business pays to get a product to its door, including the purchase price, shipping, customs duties, taxes, insurance, and any other fees. This amount is important in core accounting because it helps small...

Liability

An obligation or debt that a business owes to others, such as loans, unpaid bills, or taxes. In Core Accounting, liabilities are recorded on the balance sheet and show what the business needs to pay in the future.

Limited Liability Company (LLC)

A type of business structure that protects owners from being personally responsible for the company’s debts or legal issues. It combines the flexibility and tax benefits of a partnership with the liability protection of a...

Loan Expense

Money a business pays as interest or fees for borrowing funds, such as from a bank or lender. This cost is tracked in Core Accounting to help monitor overall business expenses and financial health.

Loan Principal

The original amount of money borrowed from a lender, not including interest or fees. In core accounting, tracking this amount helps you understand how much you still owe and how much of your payments go toward reducing the debt...

Long-Term Liability

A financial obligation or debt that a business is required to pay back over a period longer than one year, such as loans or mortgages. In Core Accounting, these are tracked separately from short-term debts to help business...

M

Managerial Accounting

This type of accounting focuses on providing financial information and analysis to help business owners and managers make better decisions about running their company. Unlike core accounting, which tracks and reports overall...

Monthly Close

This is the regular process of reviewing and finalizing all financial transactions for the month to ensure records are accurate and up to date. It’s a key part of core accounting, helping business owners track income, expenses,...

N

National Association of State Boards of Accountancy (NASBA)

An organization that helps set standards and supports the boards that license and regulate accountants in the United States. It works to ensure that accounting professionals meet the right qualifications and follow the rules,...

Net Income

The amount of money your business has left after subtracting all expenses, taxes, and costs from total sales. This key figure, often found in Core Accounting reports, shows your company’s true profit over a specific period.

O

Objective Key Results (OKR)

A goal-setting framework that helps businesses clearly define what they want to achieve (Objectives) and how they’ll measure progress (Key Results). This approach makes it easier to track business performance and align team...

Operating Agreement

A legal document used by LLCs to outline how the business will be run, including rules for management, ownership, and decision-making. This agreement helps keep your business organized and is important for meeting business...

Owner's Distribution

A payment made to business owners from the company’s profits, usually in cash or other assets, as a reward for their investment. This is tracked in Core Accounting to show how much money has been taken out of the business by its...

Owner's Equity

This is the value of a business that belongs to its owner after subtracting all debts and liabilities. It shows how much of the company the owner truly owns and is a key part of core accounting, helping track the financial...

P

Partnership

A partnership is a type of business structure where two or more people share ownership, responsibilities, and profits. Each partner contributes to the business and is involved in its management. To stay legally compliant,...

Pass-Thru Entity

A type of business structure where profits and losses go directly to the owners’ personal tax returns, instead of being taxed at the company level. This helps simplify taxes and can make it easier to stay in line with business...

Payback Period

The time it takes for a business to recover the initial investment made in a project or asset, measured by how long it takes for the cash inflows to equal the cash outflows. This simple calculation helps small business owners...

Payment Gateway

A secure online service that processes customer payments for goods or services, allowing businesses to accept credit cards, debit cards, and other electronic payments. It connects your website or point-of-sale system to your...

Payroll

A list of employees and the total amount of money a business pays them for their work, including wages, salaries, bonuses, and deductions. Managing this is an important part of core accounting, as it ensures employees are paid...

Payroll (FICA/FUTA) Tax

This tax is money that employers must withhold from employees’ paychecks and also pay themselves to the government, helping fund programs like Social Security and Medicare (FICA) and unemployment insurance (FUTA). It’s a key...

Preferred Stock

A type of company share that gives owners priority over common shareholders when it comes to receiving dividends and assets if the business closes. Having this kind of stock can affect how a business meets certain legal and...

Profit Margin

The percentage that shows how much money your business keeps as profit after covering all costs from sales. This key figure helps you see how efficiently your business is making money and is a basic part of Core Accounting,...

Purchase Order

A purchase order is a document that a buyer sends to a seller to officially request goods or services, listing details like quantities, prices, and delivery dates. It helps keep track of what has been ordered and is an important...

Q

Quality Control

A process used to make sure products or services meet certain standards before they reach customers. In the context of core accounting, it helps ensure that financial records and reports are accurate and reliable, supporting...

Quick Ratio

A financial metric that shows how easily a business can pay its short-term bills using only its most liquid assets, like cash and accounts receivable. It’s a key part of Core Accounting because it helps small business owners...

R

Raw Materials

Items or substances used in the initial stage of making products, such as wood, metal, or fabric, before they are turned into finished goods. In core accounting, tracking these helps businesses know the cost of what goes into...

Reconciliation

Making sure your business records match up with bank statements or other financial documents, so you can confirm that all transactions are accurate and nothing is missing or incorrect. This is an important part of accounting...

Refund

A refund is money returned to a customer after they have paid for a product or service, usually because of a return, cancellation, or overpayment. In business, refunds are recorded in accounting documents to keep track of all...

Regulation A Funding

A way for companies, including startups, to raise money from the public by offering shares or securities, with less strict rules than a traditional IPO. This method helps small businesses access more investors while staying...

Regulation CF Funding

A way for small businesses and startups to raise money from the public through online crowdfunding platforms, following specific rules set by the government to protect investors. This method allows companies to get funding from...

Regulation D Funding

A way for companies, including startups, to raise money from investors without having to register with the SEC, using specific rules that make it easier and faster to get funding while still protecting investors.

Retained Earnings

Profits that a business keeps after paying out expenses and any dividends to owners; these funds are often used to reinvest in the business or pay off debts. This is a key part of core accounting, helping track how much money...

Revenue Recognition

This is the process of deciding when your business should record income from sales or services in your financial records. It’s a key part of core accounting because it helps ensure your books accurately show when money is...

Runway

A simple way to describe how long your business can keep operating before it runs out of money, based on your current cash and spending habits. This is important in Core Accounting because it helps you plan ahead and make smart...

S

S-Corporation

A type of business structure that allows profits and losses to pass directly to the owners’ personal tax returns, avoiding double taxation. This setup requires following specific IRS rules and ongoing business compliance, such...

Sales Channel

A way your business sells products or services to customers, such as through a physical store, online shop, or third-party marketplace. Tracking each method helps you organize sales and connect them to your core accounting,...

Sales Order

A sales order is a document created by a business to confirm a customer’s request to buy products or services. It lists what the customer wants, the agreed prices, and delivery details. This document is part of the accounting...

Sales Tax

A fee added to the price of goods or services at the point of sale, collected by businesses and sent to the government. This type of tax is one of several business taxes that companies may need to handle, and it’s important to...

Seed Funding

The first money invested to help a new business get started, usually coming from founders, friends, family, or early investors. This early funding helps cover basic costs and develop ideas before the business is ready for larger...

Short-Term Liability

A financial obligation that a business needs to pay within one year, such as bills, short-term loans, or accounts payable. These are important to track in Core Accounting because they affect your company’s cash flow and help you...

Sole Proprietorship

A type of business owned and run by one person, where there is no legal separation between the owner and the business. The owner is personally responsible for all debts and obligations, and must follow local business compliance...

T

Tariff

A fee or tax that a government charges on certain imported or exported goods, often affecting the cost of doing business internationally. In Core Accounting, these charges are recorded as part of the cost of goods or expenses,...

Tax Deduction

A tax deduction is an expense that can be subtracted from your business income, which lowers the amount of money you have to pay taxes on. This helps reduce your overall business taxes, making it important to keep track of...

Third-Party Logistics Provider (3PL)

A third-party logistics provider helps businesses manage and outsource tasks related to storing, packing, and shipping products to customers. Using these services can simplify order fulfillment and inventory management, making...

U

Unearned Income

Money received by a business before providing goods or services, such as advance payments or deposits. In core accounting, this is recorded as a liability on the balance sheet until the business fulfills its obligation.

Unrelated Business Income (UBI)

Income earned by a nonprofit organization from activities not related to its main purpose, such as selling products or services outside its usual mission. This type of income may be subject to business taxes, even though the...

V

Value-Added Tax (VAT)

A type of tax added to the price of most goods and services at each stage of production or distribution. The final customer usually pays this tax, which is then collected by businesses and sent to the government. It is one of...

Vendor

A vendor is a person or company that sells goods or services to your business. In Core Accounting, vendors are tracked so you can manage payments, keep records of purchases, and organize your expenses.

W

Wages

Money paid to employees for their work, usually on an hourly, daily, or weekly basis. This amount is a key part of payroll and is recorded as an expense in your core accounting system.

Wholesaler

A business that buys products in large quantities from manufacturers or distributors and then sells them in smaller amounts to retailers or other businesses. In Core Accounting, transactions with wholesalers are tracked to...

Work-in-Progress

Items or products that are still being made or completed, not yet finished or ready for sale. In Core Accounting, these are tracked as assets until the work is done and the items are sold.

Workers Compensation

Insurance that helps cover medical costs and lost wages if an employee gets hurt or sick because of their job. Most businesses are required to have this coverage, and the cost is often considered part of your overall business...

Y

Yellow Book

A set of government-issued standards and guidelines for auditing, often used when reviewing financial records for public organizations or government-funded projects. These rules help ensure accuracy and transparency in financial...

Yield to Maturity

The total return an investor can expect to earn if a bond is held until it matures, including both interest payments and any difference between the purchase price and the amount paid back at maturity. This concept is useful in...

Z

Zero-Based Budgeting

A budgeting method where you start from scratch each period, building your budget based on actual needs and expenses rather than last year’s numbers. This approach helps small business owners closely track spending and make sure...