Bookkeeping Terms Explained for Small Business

Small business owners often encounter bookkeeping and accounting terms that are unfamiliar or confusing. Understanding these terms makes it much easier to manage financial records and communicate with accountants or tax professionals.

This glossary explains common bookkeeping terms in simple language so micro businesses, sole traders, and one-person operators can understand how financial records work.

Accounts Receivable

Accounts receivable refers to money owed to a business by customers who have received goods or services but have not yet paid their invoices.

When a business issues an invoice and the customer has not yet paid, that invoice is considered accounts receivable.

Accounts Payable

Accounts payable refers to money a business owes to suppliers or service providers for goods or services it has purchased but has not yet paid.

Tracking accounts payable helps businesses understand upcoming expenses and cashflow requirements.

BAS (Business Activity Statement)

A Business Activity Statement (BAS) is a report submitted to the Australian Taxation Office by businesses registered for GST. The BAS reports GST collected from customers and GST paid on business purchases.

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Cashflow

Cashflow refers to the movement of money into and out of a business. Positive cashflow occurs when more money is coming into the business than leaving it.

Monitoring cashflow helps business owners understand whether they can meet upcoming financial obligations.

Chart of Accounts

A chart of accounts is a list of categories used to organise financial transactions in a bookkeeping system. These categories help businesses group similar income and expense transactions for reporting purposes.

Expense

An expense is a cost incurred while running a business. Common expenses include materials, equipment, software subscriptions, rent, and business travel.

Recording expenses accurately helps businesses understand their costs and prepare tax information.

GST (Goods and Services Tax)

GST is a tax applied to many goods and services in Australia. Businesses registered for GST must charge GST on sales and may claim GST credits on eligible business purchases.

GST information is usually reported through BAS statements.

Income

Income refers to money received by a business from selling goods or providing services. Recording income clearly allows business owners to understand how much revenue their business generates.

Invoice

An invoice is a document issued by a business requesting payment from a customer for goods or services provided.

Invoices typically include the amount owed, the date issued, and payment terms.

Overdue Invoice

An overdue invoice is an invoice that has passed its payment due date and has not yet been paid by the customer.

Tracking overdue invoices helps businesses identify payments that need to be followed up.

Profit

Profit is the amount of money remaining after all business expenses have been deducted from income. Profit indicates whether a business is financially successful during a particular period.

Receipt

A receipt is proof that a purchase has been made. Businesses keep receipts to support expense records and provide evidence if required for tax purposes.

Sole Trader

A sole trader is a business structure where one individual owns and operates the business. The business and the owner are legally connected, and business income is usually reported in the owner's tax return.

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Transaction

A transaction is any financial activity involving money entering or leaving a business. Examples include sales, purchases, payments received, or expenses paid.

Recording transactions accurately is the foundation of bookkeeping.

Learn more at www.ecashbooks.com — simple bookkeeping for micro and one-person businesses.