There is a lot of professional terms around finances, and they can be kind of daunting when trying to understand! We have created a list that is going to make knowing your numbers a breeze!
Cash accounting accounts for business transactions on financial statements when the cash flows in or out of the business.
Accrual accounting recognizes revenue when it is earned and expenses when they are incurred, regardless of when the money flows in or out of the business.
Revenue: Any money earned by the business VS. Sales: Any money earned by the business
Operating Expense: Any cost incurred by the business that goes towards the general operations of the business.
Net Income: The net income of a business is calculated by taking the gross revenue less the cost of goods sold, all business-related expenses.
Equity: Equity is the business's assets less the liabilities.
Owner's Pay: Owner's Pay on the balance sheet is where all draws the owner takes in the form of checks, bank transfers, etc.
Download our full glossary of terms here