Get familiar with the terms
Glossary
Income
Also known as revenue, is the money you earn through selling your products and services.
Invoicing
Invoices are just like receipts you get when shopping: They’re documents recording a transaction between buyers and sellers.
Financial Statements
These are formal records of the financial activities and position of a business. There are three main types of financial statements: the balance sheet, income statement (profit & loss), and statement of cash flows.
Invoice Tracking
Invoice tracking is when you keep organized and updated record of all invoices and payments to have an accurate reference of your cash flow and avoid any errors in your accounting. It’s one of the most important tasks as a business owner.
Cash Flow
Cash flow is the money moving in and out of your business every month. The cash comes in as payments from costumers, and it goes out for your expenses, payroll, and taxes.
Expenses
These are your standard payments and bills, just like any other area of life, such as software expenses merchant fees, and office expenses. These expenses must be both ordinary and necessary for your business. In other words, they must make sense for your particular business and industry.
Assets
Assets are anything that your business owns, e.g., cash in your bank accounts, your inventory, accounts receivable (A/R) balance, property, equipment, etc.
Liabilities
Liabilities are what your business owes, like your accounts payable (A/P) balance, credit cards or loans.
Equity
Equity is the total value returned to you after you’ve paid off all your debts and expenses. You can figure this out by subtracting your liabilities from your assets.
Tax Deductions
Tax deductions: (write-offs) are expenses that you can deduct from your total revenue to decrease the amount of taxes you need to pay for that year.