Accounts Payable - How much you owe your vendors and suppliers. Accounts payable increase when you receive an invoice or a bill and are recorded as an expense or purchase. Accounts payable decrease as you pay your bills. If you pay at the time of the purchase, there are no accounts payable.

Accounts Payable Ageing - A schedule in detail or summary of payables owed with date range columns to group the liabilities by age.  

Accounts Receivable - How much your customers owe you. Accounts receivable increase when an invoice or a bill is created by a sale to a customer. Accounts receivable decrease as your customers pay you. If customers pay at the time of the sale, there are no accounts receivable.

Accounts Receivable Ageing - A schedule in detail or summary of receivables due you with date range columns to group the assets by age.  

Accrual Basis - An accounting method that records transactions when they happen even if no money changes hands. The use of accounts payable, accounts receivable and inventory is accrual basis.

Balance Sheet - The value of assets, liabilities and owner's equity at specific point in time.

Bank Reconciliation - The process of figuring out why what you think the bank balance is and what the bank say it is are not the same, Generally it is adding and subtracting transactions that you don't know about (bank fees) and transactions that the bank hasn't received yet (outstanding checks). It is an important procedure to safeguard your money and find any mistakes in your balance or a bank error.

Basis - The value of an asset, liability or equity computed using accounting principles or tax regulations. An item may have a different value for accounting and tax.

Cash Basis - Transactions are only reported when money changes hands, customer pays you or you pay someone. The cash basis of accounting does not have accounts receivable, accounts payable or inventory. True cash basis is not common.   

Cash Disbursements - Spending money; easy to do, hard to control. Cash disbursements include payment of accounts payable and other payments not applied to accounts payable.

Cash Receipts - Money received, either from sales or other sources.

Credit - Generally an increase to liabilities and equity or a decrease to assets on the balance sheet and an increase to income or a decrease to costs and expenses on the income statement.

Debit - Generally an increase to assets or a decrease to liabilities and equity on the balance sheet and an increase to costs and expenses or a decrease to income on the income statement.

Debits and Credits - Debits result in good things on the balance sheet and bad things on the income statement. Credits are the opposite, resulting in bad things on the balance sheet and good things on the income statement. Debits increase assets like cash, receivables and equipment. Debits decrease liabilities like payables and long term debt. Debits increase costs and expenses or reduce revenue on the income statement. Credits reduce assets and increase liabilities on the balance sheet. On the income statement, credits increase revenue or decrease expenses. 

Depreciation - The process of spreading the cost of fixed assets over the assets estimated useful life. The theory is to match revenue with expense. 

Double Entry - Every transaction is recorded with a debit and a credit that are equal. The debit  and the credit may be divided and posted to more than one general ledger account. With accounting software, many transactions only require the entry of one amount but equal debits and  credits are recorded automatically.

This an on going project, more will be added. If you think there is an inaccuracy or clarification is necessary contact us.

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