Reference

Bookkeeping & US tax glossary

Plain-language definitions of the terms used across this site — what they mean and why they matter to a set of books.

Bank reconciliation: The process of matching transactions recorded in the books against the bank statement for the same period, so that every difference between the two balances is identified and explained.
Month-end close: The set of procedures performed after a period ends to finalise the accounts — posting accruals, testing cut-off, clearing open items and reviewing balances before financial statements are issued.
Accrual: An entry that records an expense already incurred but not yet billed, or revenue already earned but not yet invoiced, so results reflect activity in the period rather than the timing of cash.
Cut-off: The boundary between one accounting period and the next. Correct cut-off means each transaction is recorded in the period in which it actually occurred.
Accounts payable (AP): Amounts a business owes to its suppliers for goods or services already received but not yet paid for.
Accounts receivable (AR): Amounts owed to a business by its customers for goods or services already delivered but not yet collected.
Ageing report: A report grouping unpaid bills or invoices by how long they have been outstanding, typically current, 1–30, 31–60, 61–90 and over 90 days.
Profit & Loss (P&L): A statement covering a period of time that reports revenue earned, expenses incurred and the resulting profit or loss. Also called an income statement.
Balance Sheet: A statement of financial position at a single date, showing what a business owns (assets), what it owes (liabilities) and the owners' residual interest (equity).
General ledger: The complete record of every financial transaction a business makes, organised by account, from which the financial statements are produced.
Chart of accounts: The structured list of accounts a business uses to classify its transactions, determining how activity is grouped in the financial statements.
US GAAP: Generally Accepted Accounting Principles in the United States — the common set of accounting standards and conventions used to prepare US financial statements.
Form 1040: The US federal individual income tax return, used by individuals to report income, deductions and credits and to calculate tax owed or refunded.
Form 1065: The US federal return filed by a partnership. The partnership does not itself pay federal income tax; profit and loss pass through to the partners, reported to each on a Schedule K-1.
Form 1120S: The US federal return filed by an S corporation, a pass-through entity that generally does not pay federal income tax itself — income and losses are reported by shareholders on their individual returns.
Form 1120: The US federal return filed by a C corporation, which is taxed on its own profits at the entity level.
Catch-up bookkeeping: Bringing a set of books that has stopped being maintained up to the current period, by recording and reconciling the intervening months.
Cleanup bookkeeping: Correcting a ledger that is current but unreliable — reclassifying miscoded transactions, removing duplicates, fixing reconciliations and clearing suspense or opening-balance-equity accounts.

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