Below is a list of commonly used bookkeeping terms, some of which are also general financial terms.

Why you should know these terms?

For small business owners, understanding this terminology helps in communicating your financial needs to your:

  • Accountant
  • Bookkeeper
  • BAS Agent
  • Business broker
  • Investors
  • Trade partners

These accounting terms will help you:

  • Understand the processes of running your business
  • Terms for name of reports used to comply with taxation laws and other compliance laws


Australian Business Number is the number the Government and community use to identify you. It is a unique 11-digit number for your business. You must display your ABN on all Sales Invoices.

Account List

See General Ledger

Accounts Payable

This is the control account also known as Trade Creditors or Bills Payable. This account keeps track of third-party accounts payable by the business. It produces reports named Accounts Payable detailed or summary to show you:

  1. List of who the business owes money to,
  2. How much is owed, and
  3. The due date to pay the bill by.


  • Proper management of accounts payable can vastly improve Budgeting and Cash Flow Forecasts.
  • At the time of spending money out of the business, it is important to know the difference between Accounts Payable and Spend Money so you do not leave the bill unpaid and accidentally pay it twice.
  • It is not advisable to process the BAS as a Trade Creditor, it is best done as a General Journal to the ATO Integrated Client Account.

Accounts Receivable

This is the control account also known as Trade Debtors or Sales Invoices. This account keeps track of third-party accounts receivable amounts that are owed to the business, as it has trusted to give credit and trading terms to. It produces reports detailed or summarised to show you:

  1. List of who owes money to the business
  2. How much is owed, and
  3. The date the credit given is due to be received by the business


  • Through proper use of accounts receivable, your bookkeeper can vastly improve budgeting and cash flow forecasting.
  • At the time of receiving money into the business, it is important to know the difference between Accounts Receivable and Receive Money. This will prevent a Customer’s Invoice from being left unpaid in your accounting software. It potentially upsets customers when you send a statement showing they have not paid their accounts.
  • Helps you send out statements in line with your customer’s trading terms, such as 7 7-day accounts, or 30 days-after-end-of-Month-Accounts.


Assets are acquisitions the business owns to help run the business. These range from cash on hand or at bank, inventory/stock on hand, buildings and land, tools, vehicles and furniture. Assets also include work in progress and accounts receivable.

Balance Sheet | Statement of Financial Position

Is a statement that summary accounts grouped by business assets, liabilities and equity.  It shows the business financial situation at a particular point in time. The Balance Sheet helps the business with its working capital being money to fund day- to-day operations, and the liquidity; how quickly you are able to pay your current debts providing indication of financial health. Shows what the business owns and owes, including GST liabilities to ATO.


“Bookeeper” is the incorrect spelling of “bookkeeper”.


Bookkeeper is the is the person looks after your bookkeeping.


Bookkeeping is the recording of individual financial transactions on a day-to-day basis to help with business financial management such as who, what and when of payroll, sales and purchases.

Bookkeeping helps improve customer and supplier management, monitor taxation obligations, and plan for business growth.

Bookkeeping use to be a series of hand written journals in books thus ‘bookkeeping’. Whilst these manual hand-written journals are the steps, we bookkeepers take to ‘learn’ how to become a Great Bookkeeper, we are fortunate these days journals are kept in online accounting software in the cloud.

Bookkeeping prepares the business with financial reports – help with budgets and cash-flow forecasting.

Bookkeeping provides the business-critical information for financial health, important for goal setting, making sound business decisions and obtaining finance.


Capital is a total of the money or other assets belonging to the owner invested into the business.

Costs of Goods Sold (Direct Costs)

Costs of Goods Sold is the record of money spent on purchasing products or supplying services sold to customers. It is a direct cost of creating the goods and should not include business overheads or general expenses.


Capital acquisitions (also known as assets) may decrease in value over time. This can be an allowable business expense by the tax office. The decrease in value is measured as depreciation and written off to the business profit and loss as an expense.


Equity is the money invested in the business by the owner, plus any accumulated profits (or losses).


Expenses are any monies spent to operate the business which is not directly related to the sale of goods or services.

General Ledger

Also known as Account List. The General Ledger is a list of accounts used to record, sort and summarise each and every monitory transaction made. These accounts are arranged in the general ledger which also features the balance sheet and the income statement.

Income Statement

An Income Statement is a summarised report of accounts also known as profit and loss. It is used to calculate financial year tax payable or refundable for the business. This summary of financial activity over a certain period of time calculates revenue earned, costs of goods sold, and expenses. The Income Statement allows you to work out the overall net profit (or loss) for your business.


Liabilities are a list of all debts owed by the business. This can range from loans you’ve taken out (chattel mortgages), payroll liabilities, or any bill that remain unpaid (in Accounts Payable). It also includes any GST payable or income tax obligations.


If you have any business staff, payroll is the way you pay these employees. Payroll is an important part of bookkeeping and involves a considerable amount of financial reporting to the government. With small business bookkeeping, it is one area which often causes the most problems. Payroll includes:

  • Taxes withheld from employees’ wages.
  • Superannuation earned and payable.
  • A record of the amount per hour, hours worked, and net amount payable to employees.
  • Details of the business that is the employer, and more.


If your bookkeeper ever says, “yes that has been posted” or “I post that“, this may not mean the bookkeeper has gone to the post office. This is a term used to record a transaction. To Post in accounting term, simply means entered, approved.

Profit and Loss

See Income Statement.


Revenue is the total of all money collected in the process of selling goods, services and assets.

Statement of Financial Position

See Balance Sheet

TAX Invoice

A Tax Invoice is an invoice where the supplier is registered to collect GST.  All invoices that charge GST must state the word Tax on the invoice.  Suppliers not registered for GST do not use the word Tax on the invoice.

Trial Balance

A trial balance is used to test the accuracy of any bookkeeping and ensure the books will balance properly. This is done before pulling together all of the key information for the financial reports and closing the books for the accounting period. Fortunately, with cloud accounting packages such as Xero, MYOB, or Quickbooks it is rare that the Trial Balance doesn’t balance. It is still important to make sure you re-allocate your suspense account prior to producing financial reports.

My Great Bookkeeper

We are a bookkeeping service based on Sydney’s Central Coast, but dealing with clients Australia-wide. If you would like help with your small business bookkeeping, please Contact Us.