Learn / Accounting basics
Accounting basics, in plain English
Ten concepts, each explained in one sentence — plus why it actually matters to your business. No degree required, no jargon allowed.
The mini-glossary
Everything your accountant assumes you know
Invoice vs. receipt
An invoice asks for money; a receipt confirms money arrived.
Why it matters
Customers and tax agencies treat them very differently. An invoice creates a record that you’re owed something — which is how you track who still hasn’t paid. A receipt is proof of a completed payment, which is what you keep for expenses and audits.
Cash vs. accrual
Cash accounting records money when it moves; accrual records it when it’s earned or owed.
Why it matters
The method changes what your reports say. Accrual shows June’s big sale in June even if the customer pays in August — a truer picture of performance, and the one lenders and accountants usually prefer. Most very small businesses start on cash and graduate to accrual as they grow.
Profit vs. cash
Profit is what you earned on paper; cash is what’s actually in the bank.
Why it matters
A business can be profitable and still miss payroll, because earned money can be stuck in unpaid invoices or sitting on a shelf as inventory. Watching both numbers — not just one — is the single habit that keeps profitable businesses alive.
Profit & loss (P&L)
The report showing what you earned, what you spent, and what was left, over a period of time.
Why it matters
It’s the fastest read on whether your business model works. Revenue at the top, costs in the middle, profit at the bottom — check it monthly and you’ll know your business better than most owners ever do.
Balance sheet
A snapshot of what your business owns, what it owes, and what’s left over — on one specific day.
Why it matters
The P&L tells you how the period went; the balance sheet tells you where you stand. It’s where cash, unpaid invoices, inventory, and debt appear in one place — and it’s the first thing a lender asks to see.
Reconciliation
Checking that your books and your bank statement agree, transaction for transaction.
Why it matters
It’s the only real proof your books are complete. A reconciled month means nothing is missing, nothing is doubled — and every report built on those numbers can be trusted.
Every term on this page is something Bokeping does for you — you just get to understand what it did.
Cost of goods sold (COGS)
What it directly cost to deliver the things you sold — product, materials, freight.
Why it matters
Subtract it from revenue and you get gross profit, the number that funds everything else. If COGS creeps up faster than your prices, the business shrinks quietly — tracking it per item is how you notice in time.
Receivable & payable
Accounts receivable is who owes you; accounts payable is who you owe.
Why it matters
Together they’re the future of your bank account. A growing pile of receivables means revenue is stuck in transit; a bill list you never look at means surprises. Glance at both weekly and the bank balance stops being a mystery.
Double-entry
Every transaction is recorded in two places, so the books always balance.
Why it matters
It sounds like accountant fussiness; it’s actually an error-catching machine that’s worked for five hundred years. When every dollar has a source and a destination, mistakes surface as imbalances instead of hiding. It’s the difference between a ledger and a list.
Credit note
A document that reduces what a customer owes you — a refund’s paperwork twin.
Why it matters
When you issue a refund or fix a billing mistake, deleting the original invoice destroys history. A credit note keeps the record honest: the invoice happened, the correction happened, and the books show both.
Want the long version of profit vs. cash?Read the post
Learn by doing
The fastest way to learn bookkeeping is with your own numbers. Start free — Bokeping keeps the jargon out of your way as you go.
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