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QBO Pro
QuickBooks Pro Advisor Glossary
| Term | Definition |
|---|---|
| Account reconciliation | Compare two sets of records at the end of a period. Check that account balances are accurate, find any differences, and make changes to ensure the correct values are recorded. |
| Accountant | An accountant keeps track of business transactions and financial records to issue financial statements and determine how a business is doing on a financial level |
| Accounts payable | Money a business owes to others for goods or services |
| Accounts payable reconciliation | Compare vendor statements or invoices to the accounts payable in the records. Make sure the amount the vendor charges for goods or services matches the amount recorded in the books with no discrepancies. |
| Accounts receivable | Money that is owed to a business for providing a good or service |
| Accounts receivable aging report | Accounts receivable aging is a report that sorts a business’s unpaid invoices based on how long they’ve been overdue. It helps assess the financial health and reliability of the business’s customers. |
| Accounts receivable doubtful | An allowance for doubtful accounts is a “contra asset” because it lowers the value of an asset, like accounts receivable. This allowance, also known as a bad debt reserve, is an estimate of the amount of receivables that customers are unlikely to pay. |
| Accounts receivable reconciliation | Compare the outstanding customer invoices and balances to the accounts receivable as entered in the general ledger. Verify amounts, uncover errors and irregularities, and identify fraudulent activity |
| Accounts uncollectible | Accounts uncollectible are receivables, loans, or other debt that will not be paid by a debtor |
| Accrual | An entry to record a future revenue or expense in the current period, even if money hasn’t been paid or received yet |
| Accrual accounting | Revenues and expenses are reported or recognized on financial reports when they are earned or incurred, rather than when the payment is made or received |
| Accumulated depreciation | Accumulated depreciation is the total amount of depreciation expense that has been allocated for an asset since the asset was put into use |
| Adjusted trial balance | Listing of the ending balances in all accounts after adjusting entries have been prepared |
| Adjusting entries | Creating new entries to record depreciation and accrual adjustments; these are provided to bookkeepers by a CPA or accountant |
| Amortization | The structure process of paying both the principal and interest over a period of time |
| Assets | Anything the business owns of value or a resource of value that has the potential to be transformed into cash |
| Average cost method (AVCO) | Inventory value is based on the average cost of all materials purchased during the reporting period |
| Bad debt | Bad debt refers to loans or unpaid balances that a business considers uncollectible. For businesses that offer loans or credit, bad debt is a normal and expected part of their operations. |
| Bad debt expenses | A bad debt expense is when a business can’t get money from a customer because they can’t pay because of money problems. Companies that let customers buy on credit show bad debts as “allowance for doubtful accounts” on their balance sheet. |
| Balance sheet | The balance sheet is a financial statement that reports a business’s assets, liabilities, and equity at a specific point in time |
| Balances (account balances) | A total amount in an account at any given time |
| Bank deposit receipt (slip) | A bank form used to document the money the customer intends to deposit into their bank account |
| Bank reconciliation | Compare the books to the statement issued by the bank Compare every transaction in the bank statement to the business’s internal records (including bank deposit slips and canceled checks) to verify both records are matching |
| Bill | Record to show what business owes vendor for goods/services |
| Book balance | The ledger balance as of a certain date |
| Bookkeeper | Bookkeepers document transactions, manage accounts, and record financial data |
| Budget | A forecast of revenue and expenses for a future period of time |
| C Corp | A business structure that is owned by one or more shareholders, but they do not carry any personal liability |
| Capital | The financial monies the business uses for operations and growth, such as cash, debt, or equity. |
| Capital contribution | The money or assets given to the business by the owner or partners |
| Cash | Assets that exist in cash form or can be immediately converted into cash |
| Cash payments | Cash receipts are the collection of money, typically from a customer, which increases (debits) the cash balance recognized on a business’s balance sheet |
| Cash sales | Cash sales refers to transactions where the customer pays for the goods or services immediately with cash, check, or a credit or debit card |
| Cash-basis accounting | Revenues and expenses are reported or recognized on financial reports when the payment is received or made, rather than when work is performed |
| Chart of accounts | Lists all of the accounts and sub-accounts used to categorize transactions |
| Close the books | Completing all required accounting tasks at the end of a financial period, such as finalizing financial statements, reconciling accounts, making adjustments, and getting the accounts ready for the next period. |
| Commercial loans | A debt-based funding arrangement between a business and a financial institution (traditional model of loan) |
| Common stock | Refers to the capital the business received in exchange for issuing stock to stockholders |
| Compensating error | Two or more errors cancel each other out, for example fixed assets account is incorrectly understated $600 and rent account is incorrectly overstated $600 |
| Complete reversal of entries | The correct amount is posted to the correct accounts but the debits and credits are reversed, for example debiting an account that should have been credited |
| Confidentiality | Clients entrust bookkeepers with very sensitive financial information, and a business owner must be able to trust that their bookkeeper will treat their data with the utmost care |
| Conflict of interest | When a person’s individual interests raise a question about their ability to act or make decisions or judgments objectively |
| Contra asset | A contra asset account reduces the balance of the related asset on the balance sheet. Its natural balance is either zero or a credit (negative). It is created as a sub-account in the Chart of Accounts. |
| Cost of goods sold (COGS) | Cost of goods sold (COGS) is the total cost of making or purchasing a product that a business sells. It includes all expenses directly related to production, such as raw materials, labor, supplies, overhead costs (like utilities), and shipping. |
| Credit card reconciliation | Compare credit card receipts with the statements from the credit card company. Check that the billed amount matches the actual payments. If there are any errors, report them and have them corrected. |
| Credit memo | A document issued by a seller that reduces the amount a customer owes from a previous sales invoice |
| Credit sales | A decrease in assets or expenses or an increase in liabilities, owner’s equity or revenue. |
| Credits | A monetary instrument directing the financial institution to pay the bearer a specified sum of money |
| Current assets | Assets that can be converted into cash quickly (within a year) |
| Current liabilities | Debt obligations that come due within one year |
| Data entry error | The amount was written incorrectly or under the incorrect account |
| Debits | An increase in assets or expenses or a decrease in liabilities, owner’s equity, or revenue |
| Dedicated accounting software | Specialized software designed for managing financial transactions, creating financial statements, and handling various accounting tasks. |
| Deferral | An entry to record a current payment or expense at a later period when the money has actually been earned or incurred |
| Deferred revenue (unearned revenue) | Revenue that is paid to the business for work not yet performed, recorded in books as liability |
| Depreciation | Spreading out the cost of an item over the expected life of the item |
| Depreciation expense | Depreciation expense is the cost of an asset that has been depreciated for a single period. It shows how much of the asset’s value has been used up in that year |
| Discrepancy | An inconsistency between the books and supporting documentation |
| Disposition | When the business removes, sells, or disposes of an asset |
| Dividend | Dividends are what a business pays out to shareholders from business earnings |
| Double-entry accounting | A method of bookkeeping that uses at least 2 entries, a debit and a credit, for every transaction |
| Draw | When an owner takes funds from their business holdings for individual use |
| Efficiency | How effectively a business is doing something over a given period of time |
| Employee | Someone who may be eligible for benefits (such as medical), and the business is responsible for collecting and paying income taxes on them |
| Employee vacation payable | A place to store wages for salaries dispersed when an employee is using paid time off/vacation pay |
| Equity | Owner’s stake in the business, how much they have invested or withdrawn |
| Error of commission | A type of data entry error where the bookkeeping entry was made to the correct type of account but the wrong customer/item, for example Customer X paid an invoice but it was credited to Customer Y’s account |
| Error of omission | A transaction is missing |
| Error of original entry (transposition) | During data entry, a type of data entry error where the numbers were flip-flopped. For example, $87.50 entered as $85.7 |
| Error of principle in accounting | A type of data entry error where the bookkeeping entry is made to the wrong type of account, for example a sale is credited to an expense account instead of a sales account |
| Exempt | Costs associated with the action of running a business |
| Federal Insurance Contributions Act (FICA) | Taxes going into Medicare and Social Security. This is paid by both employees and employers. An amount on the pay stub indicates the portion the employee contributed |
| Federal Unemployment Tax Act (FUTA) | A tax that employers pay to help fund unemployment benefits for workers who lose their jobs. |
| Financial analysis | Financial analysis involves reviewing and comparing a business’s financial performance over time |
| Financial ratios | Showcase a relationship between two or more accounting numbers that are taken from the financial statements |
| Financial statements | Financial statements are reports that show how a business is doing financially and its activities. They include the balance sheet, income statement (showing revenue, expenses, and net income for a period), and cash flow statement |
| Financing activities | Part of the statement of cash flows that includes paid-in capital or owner’s draws |
| Finished goods placeholder | Completed products readily available for sale to a business’s customers |
| First-in, first-out (FIFO) | The business considers the first units purchased (First In) to be the first units sold (First Out) |
| General Ledger (or Ledger) | Provides a record of each financial transaction that takes place during the life of an operating business and contains all accounts needed to prepare financial statements |
| Gross pay (gross wages) | The total amount earned by an employee for a pay period before any deductions |
| Gross profit | Total revenue minus Cost of Goods Sold |
| Gross profit margin | The earnings a business makes per item sold. For example, an item that costs $4 to make and sells for $10 has a $6 (60%) profit margin |
| Historical cost placeholder | Historical cost is a measure of value used in accounting in which the value of an asset on the balance sheet is recorded at its original cost when acquired by the business |
| Honesty | Owning any mistakes and doing everything you can to fix them and being open and transparent with your client about the state of their finance |
| Horizontal analysis | Compares historical financial information over a series of reporting periods |
| Hospital Insurance (HI or Medicare Tax) | Hospital Insurance (HI), also called Medicare Tax, is a part of the Federal Insurance Contributions Act (FICA) that helps fund Medicare for healthcare. |
| In transit | A transaction recorded on the books but not yet processed and cleared by the bank |
| Income statement | The income statement, also called the profit and loss (P&L) statement, shows how much money the business made and spent during a certain time. |
| Independent contractor | Considered self-employed and are contracted to provide services as a non-employee, therefore must pay taxes independently and are not eligible for benefits or regular employees |
| Insolvency | When a business is unable to pay their debts when they become due |
| Interest rate | The percentage of the loan amount you have to pay to the lender for borrowing money. |
| Inventory | Inventory, or stock, is the stuff a business uses to make products or the finished items that are ready to sell. |
| Investing activities | The part of the cash flow statement that shows all the cash coming in or going out from buying things like buildings or equipment, or investing in other businesses. |
| Inventory reconciliation | Compare purchase orders and inventory counts to the numbers in the books. Verify that descriptions, quantities and prices are entered correctly |
| Inventory valuation | The method used to figure out how much the inventory is worth on the balance sheet. |
| Invoice | An invoice is a detailed bill for products sold or services provided. It usually includes payment terms if the sale is on credit. When a business buys things like supplies from another business, the bill they get is called a “purchase invoice.” |
| Last in, first out (LIFO) | The business sells the newest items it buys first, like a “last in, first out” rule. |
| Lease | A lease is an agreement where you pay rent for a certain time to use something, like a car or building. |
| Liability | A liability is something a business owes, like money or debts that need to be paid. |
| Limited Liability Company (LLC) | A business setup where one or more people own it, but they aren’t personally responsible for the debts or issues the business faces. |
| Liquidity | In business, it shows how able a company is to pay off its short-term debts, usually shown as a ratio or percentage. |
| Loan amount | The amount of money borrowed in a loan. |
| Loan structure | The details of the loan, like how and when it needs to be paid back. |
| Lockbox system | Businesses can have customers send payments to a special bank address called a lockbox. The bank gets the payments and sends the details to the business’s accounting team. |
| Long term (fixed) assets | Long-term or fixed assets are things a business buys to keep for a long time, usually for more than a year, to help the business grow. |
| Long-term liabilities | Debts that the business doesn’t have to pay back within the next year. |
| Matching principle | Revenues and the costs related to making that money should be recorded in the same time period. |
| Merchandise | Finished products a business buys from a supplier to sell later. |
| Mortgage | A special long-term loan used to buy property or buildings, usually with a longer repayment period than regular loans. |
| Natural balance | In financial accounting, each type of account usually has a standard balance. Assets and expenses often have a debit balance, while liabilities, revenues, and equity accounts usually have a credit balance. |
| Net Assets | The value that’s left for the owners or shareholders after all debts and bills are paid. |
| Net cash increase/ decrease | From the cash flow statement, it’s the total change in cash from the start to the end of the period, including cash from operating, investing, and financing activities. |
| Net pay | The amount an employee actually gets to keep after all deductions, like taxes, are taken out. This is what goes into their paycheck or bank account. |
| Net profit/income | The total left after you subtract all expenses (including taxes) from the total revenue. This is the business’s profit. |
| Net sales | Gross sales minus any returns or discounts equals net sales, or the actual amount the business made after adjustments. |
| Non-sufficient funds check | Non-Sufficient Funds (NSF) checks are checks that bounce because the person who wrote it didn’t have enough money in their bank account. They’re also called “rubber checks.” |
| Non-exempt | Nonexempt employees are those who must be paid overtime if they work more than 40 hours a week. This usually applies to hourly workers. |
| Nonprofit Corporations | A business structure that is founded by one or more people, but no person/group is considered the owner as they are considered public organizations governed by a board of directors. Founders do not carry any personal liability |
| Notes payable | Notes payable is like when a business borrows money and has to pay it back later. It’s something they owe, so it’s called a liability. |
| Notes receivable | Notes receivable is like when someone else promises to pay the business money later. Since the business is going to get money, it’s called an asset. |
| OASDI/Social Security | Another term for Social Security. Stands for old age, survivors, and disability insurance tax. This is part of Federal Insurance Contributions Act (FICA) |
| Objectivity | Never allowing another party to influence your findings or letting personal bias get in the way of performing your duties |
| Operating activities | From the statement of cash flow, includes all cash inflows and outflows related to operating a business |
| Operating expenses | The day-to-day expenses incurred as the business generates revenue directly associated with the core business activities |
| Operating profit | The profitability of a business’s core operations before interest, taxes, and non-operating expenses are deducted, calculated by subtracting the total operating expenses from the gross profit |
| Outstanding | A check or other payment issued that has not yet cleared and been reported on the bank statement |
| Packing slips | A document that details the contents of a shipment to the receiving customer |
| Paid Time Off (PTO) | Considered a benefit. When used, paid wages for time off will be categorized on a pay stub and journal entry under this heading |
| Partnership | A business structure that is owned by two or more partners who take on unlimited personal liability |
| Pay or check date | The date pay is given to the employee (pay day) |
| Pay period | Refers to the frequency payrolls are run by a business |
| Payroll records | Employee timecards or other internal business documents that record an employee’s wages and number of working hours for a specific period |
| Periodicity assumption | A business can tell how much money it makes and spends during certain times, like every month, every three months, or every year. It’s like checking how your piggy bank is doing at different times! |
| Periodic Inventory System | The inventory account gets checked and updated only once in a while, like at the end of a month or year. It’s not kept track of every day. |
| Perpetual Inventory System | The inventory account is always being updated, like every time something is bought or sold. It’s kept up-to-date all the time! |
| Petty cash | Petty cash is a small amount of money kept by a business for unexpected small expenses during normal operations. |
| Plant, Property & Equipment (PPE) | PP&E is like the big stuff a business owns, like buildings, machines, or land, that helps them make money for a long time. Buying these things is called a capital investment because it’s spending money to help the business grow and work better for years! |
| Professionalism | This means being kind and respectful, always doing the right thing so nobody feels embarrassed, and making sure you’re good at your job and have the right qualifications to do it well. |
| Profit - operating profit | Total left after taking gross profit minus total operating expenses |
| Profit (loss) before taxes | Total of operating profit (loss) and other income (such as interest income) |
| Profit margin | Calculated from the income statement, a ratio of profit to sales revenue used to assess profitability |
| Profitability | Measure of financial gain, what percentage of revenue is retained as profit |
| Promissory note | A promissory note is a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand |
| Purchase order | A document that specifies the details of an order for goods or materials. Copies are sent to both the supplier and the business’s own accounts payable department for comparison |
| Raw materials | The materials used by a business to create products, such as materials to create shirts |
| Reconciliation | The process of comparing transactions and activity to supporting documentation |
| Register | A detailed complete transaction history and current of an account. All of the account registers make up the chart of accounts |
| Retained earnings | From the statement of equity, also shown on the Balance sheet, this is accumulated net income from previous years minus any dividends paid to shareholders |
| Revenue | Income earned through business, gross proceeds or sales |
| Revenue - Net sales | Total amount of revenue from sale of goods or services. |
| Revenue recognition principle | A business recognizes its revenues when the goods or services are provided to the customer, regardless of when the payment is received. |
| Revenue - Sales revenue | Revenue from the sale of goods or services |
| Revenue - Service revenue | Revenue from the sale of services. |
| Reverse transactions | Transactions that you entered “backward.” For example, entering a deposit as a withdrawal |
| Rounding error | Numbers were rounded that shouldn’t be. |
| S Corp | A business structure that is owned by no more than 100 shareholders (all must be US citizens) and must maintain a board of directors, but owners do not carry any personal liability |
| Salaries payable | Employee wages before taxes and other deductions are withheld, that have not yet been paid. |
| Sales order | When a business receives a purchase order from a customer, it creates a sales order document. |
| Sales receipts | A sales receipt is a paper or record the seller gives when something is bought. It shows what was sold, how much was paid, and helps with taxes, tracking inventory, or for customers to keep track of their spending. |
| Sales Tax Payable | A balance sheet account that shows the sales tax a business collects from customers, which will be paid to the government later. |
| Sales transactions | Sales bring in money for a business by selling goods or services. |
| Service life | The useful life of an asset is how long you can expect to use it for your business. |
| Shareholder equity | The amount of money shareholders would get if the business closed and all debts were paid. |
| Shareholders | People or groups who own the business. They have rights and responsibilities and share in the business’s success. |
| Short-term (current) assets | Short-term assets are things a business can turn into cash quickly, usually within a year. |
| Sole Proprietorship | A business owned by one person who is responsible for all its debts. |
| Solvency | This shows how well a business can handle its long-term debt. |
| Source documents | Source documents are original records that prove a transaction happened. They should show the names of those involved, a reference number, transaction details (like date, description, and amount), and sometimes a signature for approval. |
| State Disabilities Insurance (SDI) | State Disability Insurance (SDI) is a program that provides short-term wage replacement benefits to workers who lose income due to a disability, illness, or pregnancy. It’s usually funded through payroll deductions. |
| State Unemployment Tax Act (SUTA) | The State Unemployment Tax Act (SUTA) is a state-level payroll tax that employers pay to fund unemployment benefits for workers who lose their jobs through no fault of their own. Each state sets its own tax rates and rules. |
| Statement of cash flows (or cash flow statement) | The cash flow statement shows where a business gets its cash and how it spends it. |
| Statement of (owner’s) equity | The statement of equity shows how a business’s equity changes, starting with the opening balance and ending with the closing balance for a specific time period. |
| T-account | A T-account is a chart with debits on the left side and credits on the right side. |
| Taxable wages | Money that a worker earns that the boss has to take taxes out of, but it doesn’t count stuff like money put into a health savings account that isn’t taxed. |
| Term | how many years a business has to pay off a loan before they fully own what they bought |
| Total Operating Expenses | Other costs of running a business, like paying workers, rent, and utility bills. |
| Transaction Journal (or Journal) | A place where details of a single transaction are shown, making it easier to find than in the General Ledger. |
| Transactional reconciliation | Match the books line by line with another document to ensure all transactions align and are accounted for. |
| Transactions | A single event like an expense or revenue. |
| Unadjusted trial balance | A list showing all account titles and balances on a certain date before making adjustments. |
| Unrealized gains | The theoretical profit that a business will receive when they sell a stock, commodity, or make a currency exchange. |
| Variance analysis | The practice of evaluating the difference between budgeted costs and actual costs within your business. |
| Vendor | An entity that the business purchases products or services from, sometimes for resell or for companies use, also known as a supplier. |
| Vertical analysis | |
| Wage garnishment | A legal procedure in which a person’s earnings are required by court order to be withheld by an employer for the payment of a debt such as child support. |
| Work in progress | Also known as goods-in-process represents raw materials in the process of being transformed into a finished product. |
| Working capital loan | A loan used to finance a business’s daily operations. |
| Year to Date (YTD) | Year to Date (YTD) refers to the period from the start of the current fiscal year up to the current date. It represents the total of all financial transactions during that time. |
| Economic entity assumption | The business is a separate entity, so the activities of a business must be kept separate from any other financial activities of the business owners. Example: Business and personal expenses need to be separate |
| The reliability assumption | Companies must record only accounting transactions that can be verified with documents like invoices, billing statements, receipts, or bank statements. |
| Full disclosure principle | All information relevant to the business and important for lenders or investors must be disclosed in the financial statements or in the notes attached to them. |
| Conservatism assumption | When bookkeepers or accountants are unsure about how to report something, the principle of conservatism guides them to choose the option that reflects less income or asset value. This means potential losses can be recorded, but potential gains cannot. |
| Materiality principle | An accounting standard can be overlooked if its impact on the financial statements is so small that it wouldn’t be misleading. This is subjective, so bookkeepers should seek advice from colleagues or an accountant when necessary. |
| Consistency principle | When a business adopts a specific accounting method, it must apply that method consistently to similar items in the future. This principle applies to all financial statements and reports. |
| Monetary unit assumption | One currency is used consistently in all accounting activities. In the US, the US dollar is the currency used for accounting. Inflation is not considered when recording financial transactions. |
| Going concern assumption | A business is considered a “going concern” if it is stable enough to operate and meet its obligations in the foreseeable future. The business makes decisions with the goal of continuing operations, not liquidating. |
Created by:
mermarie1995
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