Bookkeeping Glossary
Plain-language definitions of 17 key bookkeeping terms you will encounter in QBO, your financials, and with your Mesa CPA team.
Accounts Payable (AP)
Money your business owes to suppliers or vendors for goods or services you have received but have not paid for yet. If you have unpaid bills sitting in QBO, those are your accounts payable.
Accounts Receivable (AR)
Money owed to your business by customers for work you have completed or products you have delivered but have not been paid for yet. Outstanding invoices are your accounts receivable.
Accrual Basis
A method of recording transactions when they are earned or incurred, not when cash actually changes hands. You record income when you send an invoice, and expenses when you receive a bill. Required for most Canadian corporations. Gives a more accurate picture of your financial position than cash basis.
Balance Sheet
A financial statement that shows what your business owns (assets), what it owes (liabilities), and what is left over for the owners (equity) at a specific point in time. Think of it as a snapshot of your financial position.
Bank Feed
An automatic connection between your bank account and QBO that pulls in transactions daily. Instead of entering every transaction manually, your bookkeeper reviews and categorizes what comes through the feed.
Bank Reconciliation
The process of confirming that your QBO records match your actual bank statement, every transaction, every dollar, line by line. Done monthly by your bookkeeper to catch errors and confirm your books are accurate.
Cash Basis
A method of recording transactions only when cash actually moves. Income recorded when you receive payment, expenses recorded when you pay them. Simpler than accrual, but can give a misleading picture if you have outstanding invoices or unpaid bills.
Chart of Accounts (CoA)
The master list of categories used to organize every transaction in your books, covering assets, liabilities, equity, revenue, and expenses. Every entry your bookkeeper makes gets filed under one of these categories.
Credit
In double-entry bookkeeping, a credit increases liability, equity, or revenue accounts, and decreases asset or expense accounts. The term does not mean "good" — it depends on what type of account is being credited.
Debit
In double-entry bookkeeping, a debit increases asset or expense accounts, and decreases liability, equity, or revenue accounts. Every transaction has at least one debit and one credit.
Double-Entry Bookkeeping
The accounting system where every transaction affects at least two accounts, one debit and one credit of equal value. This is the standard for all professional bookkeeping. It is what makes your books balance.
General Ledger
The complete record of all financial transactions in your business. Every entry made in QBO ends up in the general ledger. It is the master record that financial statements are built from.
Journal Entry
A manual record of a transaction in the books, specifying which accounts are debited and credited. Most transactions come through the bank feed automatically, but some (like year-end adjustments) require manual journal entries from your accountant.
Profit and Loss Statement (P&L)
Also called an Income Statement. A financial report that shows your revenue, expenses, and net profit or loss over a period of time, covering a month, a quarter, or a year. The most commonly reviewed financial report for day-to-day business decisions.
Reconciliation
See Bank Reconciliation.
Retained Earnings
The cumulative profit your corporation has earned since it was incorporated, minus any dividends paid out to shareholders. It sits on the Balance Sheet under Equity and grows (or shrinks) each year.
Trial Balance
A summary of all account balances in the general ledger at a point in time, used to confirm that total debits equal total credits. Your bookkeeper uses this as a check to make sure the books are balanced before producing financial statements.