Small Business Encyclopedia

Category: Accounting

Accountant

Definition: A person whose work it is to inspect, keep or adjust accounts

Accounting

Definition: A business's bookkeeping system that tracks the money coming in vs. the money going out

Accounts Payable

Definition: A company's outstanding debts, or liabilities, to vendors for purchases of goods and services made on credit

Accounts Receivable

Definition: The money due from all customers for merchandise or services delivered on credit. The total figure would be shown on the balance sheet as an asset

Accrual Accounting

Definition: Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged. The term "accrual" refers to any individual entry recording revenue or expense in the absence of a cash transaction

Balance Sheet

Definition: A financial statement that lists the assets, liabilities and equity of a company at a specific point in time and is used to calculate the net worth of a business. A basic tenet of double-entry book-keeping is that total assets (what a business owns) must equal liabilities plus equity (how the assets are financed). In other words, the balance sheet must balance. Subtracting liabilities from assets shows the net worth of the business A basic tenet of double-entry bookkeeping is that total assets (what a business owns) must equal liabilities plus equity (how the assets are financed). In other words, the balance sheet must balance.

Bankruptcy

Definition: A legal state of insolvency. A company deemed to be in this condition may choose protection under the law to allow a chance to reorganize (Chapter 11) or liquidate in an orderly fashion (Chapter 7).

Billing

Definition: To invoice customers for payment

Cash Flow

Definition: The difference between the available cash at the beginning of an accounting period and that at the end of the period. Cash comes in from sales, loan proceeds, investments and the sale of assets and goes out to pay for operating and direct expenses, principal debt service, and the purchase of asset

Cash Flow Statement

Definition: A financial statement that reflects the inflow of revenue vs. the outflow of expenses resulting from operating, investing and financing activities during a specific time period

Cash-Basis Accounting

Definition: An accounting system that doesn't record accruals but instead recognizes income (or revenue) only when payment is received and expenses only when payment is made. There's no match of revenue against expenses in a fixed accounting period, so comparisons of previous periods aren't possible.

Expense Report

Definition: A report that tracks expenses incurred during the course of performing necessary job functions. Examples include charges for gas, meals, parking or lodging.

First In, First Out (FIFO)

Definition: An accounting system used to value inventory for tax purposes. Under FIFO, inventory is valued at its most recent cost.

Income Statement

Definition: A document generated monthly and/or annually that reports the earnings of a company by stating all relevant income and all expenses that have been incurred to generate that income. Also referred to as a profit and loss statement.

Last In, First Out (LIFO)

Definition: An accounting method for inventory and cost of sales in which the last items produced or purchased are assumed to be sold first; allows business owner to value inventory at the less expensive cost of the older inventory; typically used during times of high inflation

Operating Expenses

Definition: The selling and general and administrative expenses incurred by a business

Free Business Tools

Forms

Forms

Download and customize these free forms:

Partnership Agreement

Cashflow Worksheet

Employment Application

Calculators

Calculators

Evaluate and analyze your financials:

Cash Flow

Starting Costs

Discounted Cash Flow

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About Encyclopedia

No matter what business topic you're interested in, you'll find our category list is an easy way to navigate our small-business encyclopedia. From Accounting and Advertising to Location and Operations, every topic offers information on the terms that matter most. And if you can't find what you need here, our "Terms A - Z" list makes tracking down terms a snap.

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