Speak My Language – Common Accounting Terms

by | Jul 15, 2020

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Starting a business isn’t easy. You start out with an entrepreneurial spirit and a great idea. Before long you suddenly have a million thoughts, concerns, and questions swirling around in your head. Small business accounting tends to take a backseat to other items.

This is understandable, as accounting terminology leaves most with a headache. However, the continued success and stability of your business depends on having your accounts in order. That’s why we took the time to clearly define the most common accounting terms that you will encounter. That way, you can face your Quickbooks account with confidence.

Small Business Accounting Terms

Revenue – This is the money that your company brings in from each sale

Liabilities – This is the money that your company owes. Liabilities are divided into short term(due within one year) and long term(not due within one year.)

Assets – This is a combination of the tangible and intangible property that bring value to your company. Current assets can be converted to cash within 1 year, for instance, money owed to you by customers, while fixed assets don’t convert that quickly, such as furniture and equipment you’ve purchased.

Cost of Goods Sold – This is one of the most important pieces of information that a small business owner should know. This is how much money it costs to produce what you sell. If you know how much it costs you to produce an item, it will guide you in what you should price your product at in order to make a healthy profit.

P&L – Otherwise known as ‘Profit & Loss.’ This report details earnings, expenses and net profits for a given period. This report is also sometimes called Income Statement. Your company is profitable if your revenue exceeds your expenses.

Balance Sheet – This report is a snapshot of of your assets and liabilities at a single point in time, often used, in conjunction with your P&L, to evaluate the performance of your company. If your assets (cash, property, equipment, inventory, etc) are larger than liabilities (debit, payables, etc) then you company is solvent, meaning you have the ability to meet any outstanding financial obligations.

Small business accounting can seem overwhelming, however, we are confident that just knowing a few key terms can provide clarity At My Small Business Pro we take pride in handling the accounting so that our clients are empowered to make important decisions accurately and with confidence.

MEET THE TEAM: Milen Gomez, Staff ACCOUNTANT

6 months ago, we added a new staff accountant to our team: Milen Gomez. Our newest staff accountant is the best we could ask for with her incredible attention to detail and efficient mindset. She has been an essential part of our continued growth by always putting her...

Client Spotlight: Danielle Suchala Klausing

It’s always an exciting time when you’re ready to take the next step in life and buy a home. But finding that perfect home can be a challenge, especially if you’re not familiar with the real estate industry. That’s where Danielle comes in. With over 7 years of...

Who is responsible for payroll?

One of the most expensive resources for any business is payroll. It’s also one of the most important. We are firm believers that people are your most valuable asset, so it’s no wonder that payroll gets costly. Especially if you are a professional services company, and...

Let’s just Write it off! 

Ahhh the joys of being a business owner. You get to set your own schedule, be in complete control of your success and of course, deduct your business expenses.   Just like all of those statements, there are some pros, cons and a lot of misconceptions that go...

How to beat tax stress

It's March and that means two things:   Tax season is in full swing.   Chicago winter is about halfway over.   There isn‘t much a financial consultant can do when it comes to the weather, but when it comes to making your tax season less...

Meet the team: Eileen Manaloto, Sr. Accountant

Despite a job market full of unique challenges, My Small Business Pro was incredibly fortunate to bring on a new team member last year, Eileen Manaloto. Like many small businesses, we got creative in finding the right resource to support our amazing clients and fit...

Back to the Financial Future! 

A new year is upon us! While there’s a tendency to charge into 2022 with new hopes, plans and goals; but you need to pump the brakes. One of the most prudent things you can do is slow down and take some time to do a serious review of your past. Last year is full of...

Why Your Accountant Hates You

Unless prompted, few business owners willingly gush about their accountants. I get it, accountants aren’t always the most affectionate bunch; sometimes referred to as boring or dry. Many consider them a necessary evil, number crunchers or even bean counters. Some...

Sharpen your Tax Ax

As the year winds down, most people start to slow down. People are looking forward to the holidays and start to bundle up as the days get shorter, maybe even start planning that holiday vacation. But if you’re a business owner, there’s something that starts to scare...

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