Taking care of the books and keeping track of your finances can be overwhelming. Especially for small business owners, new entrepreneurs, and anyone who is not in the accounting industry. A big part of that is the language that bookkeepers and accountants use. It gets even more frustrating when you find these same terms on the websites and systems that are supposed to be making your life easier. Between all the jargon, acronyms, and buzzwords, it can feel like a different language altogether.

That’s why we put together a little bookkeeping dictionary. A list of important basic terms that every business owner needs to know and understand. These terms will help you understand the accounting lingo a little better and help you get the most out of your books.

First, we figured we should actually define Bookkeeping.

Many people actually do not know what it entails. Bookkeeping is the act of keeping records and maintenance of a company’s financial transactions. This includes but is not limited to purchases, expenses, sales income, invoices, and payments. Good bookkeeping practices enable businesses to succeed and make informed operating, investing, and financial decisions.

One of those good bookkeeping practices is actually understanding your finances. So let’s get into those terms:

Assets: anything that the benefits from owning or controlling. Assets could be accounts receivable, cash, equipment, inventory, real estate, supplies, etc.
Liabilities: This is pretty much the opposite of assets. It's money owed by the business. For example, a business loan will be classified as a liability. Other examples are accounts payable, interest payable.
Revenues/Income: This is the easiest one there is. Any money earned by the business is income/revenue.
Expenses: this is the money flowing out of the business. Expenses are money required to keep the business running smoothly.
Equity: the value of ownership. This could be the owner's capital, dividends, etc. In layman’s terms, how much your business is worth.
Income Statement: A financial statement showing the summary of financial information/ activity over a certain period of time.
Journals: This is where bookkeepers keep records of daily company transactions. Each of the most active accounts — including cash, Accounts Payable, and Accounts Receivable — has its own journal.
Deductible: Expenses that are claimed as business expenses. They reduce business profits but also reduce the amount of income tax owed.
Inventory: An account that tracks all of the products that are going to be sold to customers.
Supplies: Supplies are items purchased and typically used up during the year. The most common types of business supplies are office supplies, including staplers, sticky notes, highlighter pens, and supplies used to run copiers, printers, and other office machines.

There you go.

Now you can use all of these terms to understand your books a bit better and take your business to the next level.

Getting Started with Bookkeeping