Bookkeeping terms, in plain English.
24 terms an owner actually runs into, defined without the jargon that usually comes with them.
- Accrual
- Recording revenue when it is earned and cost when it is incurred, rather than when cash moves. It is what makes a month reflect what actually happened in it.
- Aging report
- A list of receivables or payables grouped by how overdue they are. Useful only if someone works it rather than files it.
- Balance sheet integrity
- Every balance-sheet account agreeing with independent support — a statement, a schedule, a count. Without it the profit and loss cannot be trusted either.
- Budget versus actual
- A comparison of what you planned against what happened. The variance is the useful part; the numbers alone are not.
- Catch-up bookkeeping
- Rebuilding months or years of records that were never kept. Distinct from cleanup, which corrects work that was done wrong.
- Chart of accounts
- The structure the general ledger is organised into. It decides which questions your reports can answer, which is why restructuring it is often the first real piece of work.
- Cleanup
- Correcting historical records that were maintained but maintained incorrectly — unreconciled accounts, miscoded transactions, opening balances nobody can source.
- Close
- The monthly process of reconciling, adjusting, reviewing, and locking a period so the numbers stop changing and can be compared.
- Contribution margin
- Revenue less the direct cost of producing it. Tells you whether a product, service, or location is worth having at all, before overhead is allocated.
- Cost of goods sold
- The direct cost of delivering what you sell. Costs that scale with volume belong here, not in operating expense — the most common categorisation error we correct.
- Deferred revenue
- Money collected for work not yet delivered. It is a liability, not income, and treating it as income is how a healthy-looking business runs out of cash.
- Direct cost
- Cost traceable to a single job, product, or contract. On government contracts, keeping direct and indirect costs segregated in the ledger is a compliance requirement.
- Driver-based forecast
- A forecast built from the things that actually move the business — headcount, units, price, utilisation — rather than a percentage applied to last year.
- Fixed asset
- Something owned and used over multiple years, capitalised on the balance sheet and depreciated rather than expensed at purchase.
- Fractional controller
- The controller function delivered part-time by an outside team. Used interchangeably with outsourced controller.
- GAAP
- Generally Accepted Accounting Principles. The standard lenders, buyers, and auditors expect financial statements to follow.
- General ledger
- The complete record of every transaction, organised by account. Everything else — statements, reports, tax returns — is derived from it.
- Gross margin
- Revenue less cost of goods sold, as a percentage. Blended across a whole business it hides more than it shows; by line it is one of the most useful numbers you have.
- Indirect rate
- The rate at which pooled overhead is allocated across work. On government contracts, the pool and the base are structural decisions made in the general ledger.
- Prepaid expense
- Something paid for in advance and used over time. Recorded as an asset and expensed across the periods that benefit from it.
- Reconciliation
- Agreeing an account in the books to an independent record, usually a statement. An account that has never reconciled is an account nobody can rely on.
- Runway
- How many months of operating cost current cash covers. Meaningful only when deferred revenue and committed obligations have been taken out first.
- Undeposited funds
- A holding account for payments received but not yet deposited. Left uncleared it is one of the most common sources of overstated cash.
- Work in progress (WIP)
- The value of work performed but not yet billed. Without a WIP schedule, project businesses cannot tell a profitable month from a well-timed deposit.
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