This quick glossary of common business accounting terms will get you up to speed. A big part of understanding the financial side of your business consists of nothing more than learning the language of accounting. Once you're familiar with basic terms, you'll be well prepared to make sense of basic written reports and better able to communicate with others about important financial information. Accounting is a general term that refers to the overall process of tracking your business's income and expenses, and then using these numbers in various calculations and formulas to answer specific questions about the financial and tax status of the business. Bookkeeping refers to the task of recording the amount, date and source of all business revenues and expenses.
Bookkeeping is essentially the starting point of the accounting process.
Only with accurate bookkeeping numbers can meaningful accounting be done. An invoice is a written record of a transaction, often submitted to a customer or client when requesting payment. Invoices are sometimes called bills or statements, though the latter term has its own technical meaning, as explained below. Unlike an invoice, a statement is not generally used as a formal request for payment, but is more of a reminder to a customer or client that payment is due. A ledger is a physical collection of related financial information, such as revenues, expenditures, accounts receivable and accounts payable.