How to Speak Accountant

Accounting: it’s something that every business owner has to manage. But there are times when financial terminology can sound like a foreign language. Here are some key accounting terms that can help you navigate your own bookkeeping, or make the next meeting with your accountant go that much smoother.

Accounts payable -- the amount that your business owes others.
Accounts receivable -- amounts owed to the company by its customers.
Audit -- You know what this is. A careful review of financial records to verify their accuracy.
Balance sheet -- a statement of the financial position of a company at a single specific time (often at the close of business on the last day of the month, quarter, or year.) A balance sheet balances according to this equation: Assets = Liabilities + Capital.
Gross income -- total income before expenses like taxes and accounts payable are factored in
Net income -- gross income minus your expenses; it represents a business's profit for a given year.
Ledger -- a record of business transactions kept by type or account
Liabilities -- amounts owed by a company to others. Current liabilities are those amounts due within one year or less and usually include accounts payable, accruals, loans due to be paid within a year, taxes due within a year, and so on. Long-term liabilities normally include the amounts of mortgages, bonds, and long-term loans that are due more than a year in the future.
Overhead -- a cost that does not vary with the level of production or sales, and usually a cost not directly involved with production or sales. The chief executive's salary and rent are typically overhead.
Return on investment (ROI) -- a measure of the effectiveness and efficiency with which managers use the resources available to them, expressed as a percentage.
Write-off -- the total reduction in the value of an asset, recognizing that it no longer has any value. Write-downs and write-offs are non-cash expenses that affect profits.