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A-Z guide to Bookkeeping terminology

Start-ups – Get to grips with the basic bookkeeping terminology you need to understand your business finances.

When you enter a new realm, you discover a new language, and bookkeeping is no exception. As you forge your path in business, your vocabulary will grow, but in the beginning, it might be a challenge to understand all of the terminology used. It’s essential that you are able to make informed decisions about your business finance, so we’ve created this A-Z guide to get you started in bookkeeping terminology. Don’t see the term you’d like to know more about? Let us know and we’ll add it to the list! 

Accounts receivable

Accounts receivable refers to invoices that have been issued by your business for goods supplied or services rendered, that customers have ordered but not yet paid for. While the payment has not yet been received, on a balance sheet accounts receivable are shown as an asset.

Accounts payable

Accounts payable refers to bills that your business has received, but has not yet paid. On the balance sheet, these would appear as a liability.


An asset is anything that is owned or controlled by the business and can be assigned a monetary value. There are tangible or intangible assets. Tangible assets are physical assets such as cash, property and equipment. Intangible assets are non-physical assets such as trademarks, bonds and investments.

Balance sheet

A balance sheet is used to show a snapshot of the financial position of a business. Income and expenditure are detailed showing assets, liabilities and shareholder equity. The balance sheet doesn’t demonstrate trends, but it can be used in conjunction with previous balance sheets to do so.

Credit control

Credit control is the process of maintaining a steady cash-flow into the business by chasing overdue payments.


Equity is the amount that is left after liabilities have been deducted from the value of assets. For example, if you own a £20,000 car and owe £15,000, the equity would be £5,000.


Expenses are costs relating solely to your business and its activities and can include anything from travel through to office supplies. Expenses are deducted from your sales when submitting tax returns and therefore reduce your tax liability. 

Fixed assets

Fixed assets are goods and properties owned by the business, typically in the long-term, that are not quickly convertible into cash value. These might include land, property and equipment, for example. 

Gross profit

Gross profit is the profit calculated after cost of sales expenses have been deducted, but before any overheads and tax obligations have been deducted.


A ledger is a date-ordered record of all credit and debit transactions made through your company.


Liabilities are amounts of money owed by the business. These include loan payments, taxes, unpaid invoices for goods or services used, and unpaid wages. 

Net profit

Net profit is the company’s profit after all expenses have been deducted and tax due is calculated from here. 


Payroll is the list of employees in a company and the amount that they are to be paid. Those managing payroll are responsible for calculating all tax and national insurance contributions as well as ensuring that the correct sum is paid to the employee including benefits and subsidies. 

Profit after tax

Profit after tax can be seen as your business’s ‘true profit’ as it refers to the profit after all liabilities have been deducted, including taxes, for the accounting year. 

Profit before tax

Profit before tax is the profit after all expenses have been deducted, but before any tax calculation is deducted. 

Profit & loss

The profit and loss shows a company’s revenue and expenses for a set period of time.


To reconcile is to make sure that the figures match up. In bookkeeping, we keep track of money in and money out. When reconciling, each transaction is checked and put in the correct category allowing the bank records and transactions to align as they should.


Revenue is any money coming into the business through sales, interest or dividends.

While we hope this guide can help you navigate the language of bookkeeping, you don’t have to do it yourself. Our expert and friendly bookkeepers are here to help you with any queries. All you need to do is get in touch.

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