Accounting Glossary
This glossary covers around 70 terms across six categories: general bookkeeping basics, cash flow, taxes, income and pay, allocation and budgeting, and reporting.
Whether you are just starting out or have been self-employed for years, knowing this language helps you make faster, more confident decisions about your business money.
Bookkeeping Basics
Cash flow
Taxes for the Self-Employed
Income and Owner's Pay
Allocation and Budgeting
Financial Reports and Statements
Start here. These are the foundational terms that show up in almost every conversation about business finances.
Bookkeeping
The process of recording every financial transaction your business makes. Money in, money out, every time. Bookkeeping is the raw data layer. Accounting is what you do with that data.
Accounting
Broader than bookkeeping. Accounting includes recording transactions AND interpreting what those numbers mean. Think of bookkeeping as the input and accounting as the analysis.
Revenue
All the money your business brings in before any expenses are taken out. If you invoice a client for $3,000, that $3,000 is revenue, even if you have not been paid yet.
Income
Often used interchangeably with revenue, but in accounting they can mean different things. Revenue is the top line. Income (or net income) is what is left after expenses. Pay attention to which one is being referenced.
Expense
Any cost your business incurs. Software subscriptions, contractor fees, marketing spend, home office costs, professional development. If money goes out of your business, it is an expense.
Operating Expenses
The day-to-day costs of running your business. Rent, software, phone bills, supplies. These are recurring costs that keep the lights on, as opposed to one-time investments.
Net Income
What is left after you subtract all expenses from your total revenue. This is your actual profit. Revenue minus expenses equals net income.
Gross Income
Your total revenue before any deductions or expenses. For a solopreneur, this is typically everything you invoiced or got paid, before taxes or costs come out.
Chart of Accounts
A master list of all the categories your business uses to track money. Think of it as your financial filing system. Each transaction gets assigned to a category, like software, client payments, or Owner's Pay.
Transaction
Any exchange of money. A client payment coming in, a subscription charge going out, a transfer between accounts. Every single one should be recorded.
Reconciliation
The process of matching your bookkeeping records to your actual bank statement to make sure they match. If your records say you have $12,000 and your bank says $11,800, something needs to be found and fixed.
Accrual Accounting
A method where you record revenue when it is earned (not when you get paid) and expenses when they are incurred (not when you pay them). If you invoice in November but get paid in January, accrual accounting records it in November.
Cash Basis Accounting
A method where you record revenue only when money actually hits your account, and expenses when you actually pay them. Most solopreneurs use cash basis because it reflects real cash in hand.
Accounts Payable
Money your business owes to others. If you hired a contractor and have not paid them yet, that outstanding amount is accounts payable.
Accounts Receivable
Money owed TO your business. If a client has an unpaid invoice, that amount is accounts receivable. It is money you have earned but not yet collected.
Invoice
A document you send to a client requesting payment for work completed. It lists what was done, the amount owed, and the payment due date.
Receipt
Proof that a payment was made. When you pay for something business-related, keep the receipt. It is your evidence that the expense happened.
Journal Entry
A formal record of a financial transaction in your books. Every transaction has a journal entry that records what happened, when, and which accounts were affected.
Bookkeeping Basics
Cash flow
Taxes for the Self-Employed
Income and Owner's Pay
Allocation and Budgeting
Financial Reports and Statements
Start here. These are the foundational terms that show up in almost every conversation about business finances.
Bookkeeping
The process of recording every financial transaction your business makes. Money in, money out, every time. Bookkeeping is the raw data layer. Accounting is what you do with that data.
Accounting
Broader than bookkeeping. Accounting includes recording transactions AND interpreting what those numbers mean. Think of bookkeeping as the input and accounting as the analysis.
Revenue
All the money your business brings in before any expenses are taken out. If you invoice a client for $3,000, that $3,000 is revenue, even if you have not been paid yet.
Income
Often used interchangeably with revenue, but in accounting they can mean different things. Revenue is the top line. Income (or net income) is what is left after expenses. Pay attention to which one is being referenced.
Expense
Any cost your business incurs. Software subscriptions, contractor fees, marketing spend, home office costs, professional development. If money goes out of your business, it is an expense.
Operating Expenses
The day-to-day costs of running your business. Rent, software, phone bills, supplies. These are recurring costs that keep the lights on, as opposed to one-time investments.
Net Income
What is left after you subtract all expenses from your total revenue. This is your actual profit. Revenue minus expenses equals net income.
Gross Income
Your total revenue before any deductions or expenses. For a solopreneur, this is typically everything you invoiced or got paid, before taxes or costs come out.
Chart of Accounts
A master list of all the categories your business uses to track money. Think of it as your financial filing system. Each transaction gets assigned to a category, like software, client payments, or Owner's Pay.
Transaction
Any exchange of money. A client payment coming in, a subscription charge going out, a transfer between accounts. Every single one should be recorded.
Reconciliation
The process of matching your bookkeeping records to your actual bank statement to make sure they match. If your records say you have $12,000 and your bank says $11,800, something needs to be found and fixed.
Accrual Accounting
A method where you record revenue when it is earned (not when you get paid) and expenses when they are incurred (not when you pay them). If you invoice in November but get paid in January, accrual accounting records it in November.
Cash Basis Accounting
A method where you record revenue only when money actually hits your account, and expenses when you actually pay them. Most solopreneurs use cash basis because it reflects real cash in hand.
Accounts Payable
Money your business owes to others. If you hired a contractor and have not paid them yet, that outstanding amount is accounts payable.
Accounts Receivable
Money owed TO your business. If a client has an unpaid invoice, that amount is accounts receivable. It is money you have earned but not yet collected.
Invoice
A document you send to a client requesting payment for work completed. It lists what was done, the amount owed, and the payment due date.
Receipt
Proof that a payment was made. When you pay for something business-related, keep the receipt. It is your evidence that the expense happened.
Journal Entry
A formal record of a financial transaction in your books. Every transaction has a journal entry that records what happened, when, and which accounts were affected.
Bookkeeping Basics
Cash flow
Taxes for the Self-Employed
Income and Owner's Pay
Allocation and Budgeting
Financial Reports and Statements
Start here. These are the foundational terms that show up in almost every conversation about business finances.
Bookkeeping
The process of recording every financial transaction your business makes. Money in, money out, every time. Bookkeeping is the raw data layer. Accounting is what you do with that data.
Accounting
Broader than bookkeeping. Accounting includes recording transactions AND interpreting what those numbers mean. Think of bookkeeping as the input and accounting as the analysis.
Revenue
All the money your business brings in before any expenses are taken out. If you invoice a client for $3,000, that $3,000 is revenue, even if you have not been paid yet.
Income
Often used interchangeably with revenue, but in accounting they can mean different things. Revenue is the top line. Income (or net income) is what is left after expenses. Pay attention to which one is being referenced.
Expense
Any cost your business incurs. Software subscriptions, contractor fees, marketing spend, home office costs, professional development. If money goes out of your business, it is an expense.
Operating Expenses
The day-to-day costs of running your business. Rent, software, phone bills, supplies. These are recurring costs that keep the lights on, as opposed to one-time investments.
Net Income
What is left after you subtract all expenses from your total revenue. This is your actual profit. Revenue minus expenses equals net income.
Gross Income
Your total revenue before any deductions or expenses. For a solopreneur, this is typically everything you invoiced or got paid, before taxes or costs come out.
Chart of Accounts
A master list of all the categories your business uses to track money. Think of it as your financial filing system. Each transaction gets assigned to a category, like software, client payments, or Owner's Pay.
Transaction
Any exchange of money. A client payment coming in, a subscription charge going out, a transfer between accounts. Every single one should be recorded.
Reconciliation
The process of matching your bookkeeping records to your actual bank statement to make sure they match. If your records say you have $12,000 and your bank says $11,800, something needs to be found and fixed.
Accrual Accounting
A method where you record revenue when it is earned (not when you get paid) and expenses when they are incurred (not when you pay them). If you invoice in November but get paid in January, accrual accounting records it in November.
Cash Basis Accounting
A method where you record revenue only when money actually hits your account, and expenses when you actually pay them. Most solopreneurs use cash basis because it reflects real cash in hand.
Accounts Payable
Money your business owes to others. If you hired a contractor and have not paid them yet, that outstanding amount is accounts payable.
Accounts Receivable
Money owed TO your business. If a client has an unpaid invoice, that amount is accounts receivable. It is money you have earned but not yet collected.
Invoice
A document you send to a client requesting payment for work completed. It lists what was done, the amount owed, and the payment due date.
Receipt
Proof that a payment was made. When you pay for something business-related, keep the receipt. It is your evidence that the expense happened.
Journal Entry
A formal record of a financial transaction in your books. Every transaction has a journal entry that records what happened, when, and which accounts were affected.
A note on tax terms
Several terms in this glossary touch on taxes. The explanations here are educational and meant to help you understand the language, not to provide tax advice. Every solopreneur's situation is different. For anything related to your actual tax obligations, deductions, or filing, please work with a qualified tax professional.
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