The Accounting Glossary is a collection of the bookkeeping and accounting terms behind John's 📝Weekly Accounting practice. It gives operators, founders, and bookkeepers a shared vocabulary for keeping the books and reading the financial statements; for capital and markets terms, see the sibling 📝Finance Glossary.
Glossary
A
- 📝Accrual Accounting — the practice of recording revenue when it is earned and expenses when they are incurred, rather than when cash moves through the bank account.
- 📝Accrued Liability — an expense a business has incurred but not yet paid or been billed for, carried on the balance sheet as a liability until it is paid.
- 📝ARR — Annualized Recurring Revenue, the yearly value of a company's recurring revenue.
- 📝Automated Transactional — processing in which every cash entry is automatically matched to its accrual accounting entry as soon as it enters the books.
B
- 📝Base Budget — a revenue budget set so the company beats it in 90% of scenarios, with expenses filled in 📝Bottoms up to stay within the desired runway.
- 📝Bookkeeping — pulling transactions from the bank into an accounting system every day and processing them efficiently, escalating only on exceptions.
- 📝Bottoms up — budgeting that starts from every vendor, department, and account, reviewing past spend with each department head to forecast future spend.
C
- 📝Cash Basis — a method of recognizing revenue and expenses when cash hits the bank account, in contrast to accrual or GAAP basis.
- 📝Chart of Accounts — the numbered list of financial accounts, from 1000 Assets through 7000 Other Income and Expenses, used to record transactions in a company's accounting system.
- 📝Convertible Note — a way to take an investment in a company without the time and expense of a priced round, the older counterpart of the SAFE Note.
E
- 📝Expense Accounts — the categories a company uses to group its expenses on the income statement, such as Salary & Related and Sales & Marketing.
G
- 📝GAAP — Generally Accepted Accounting Principles, the FASB-set standards and common practices that govern how businesses record and report financial information.
- 📝General Ledger — the master record of a company's accounts, maintained in an accounting system such as QuickBooks Online.
I
- 📝Inbound Freight — the shipping, duties and tariffs to move parts to the manufacturer and finished goods to the warehouse, carried in inventory and expensed through COGS.
- 📝Income Statement — the statement of a company's revenues and expenses over a period, showing how revenue becomes net income; also called the Profit & Loss or Statement of Operations.
M
- 📝Marginal Income Statement — an income statement with every line expressed as a percentage of revenue, showing how many cents of each revenue dollar it consumes or leaves behind.
- 📝Month End Close — the traditional monthly process of invoicing customers and performing accrual accounting, which Weekly Accounting replaces with a weekly cadence.
N
- 📝Net Orderly Liquidation Value — NOLV, the measure a lender uses to decide how much to lend against a given set of assets.
O
- 📝Operational Accounting vs Tax Accounting — the 📝BrightZen Systems principle that weekly operational accounting trumps annual tax accounting, which can catch up later.
- 📝Other Variable Overheads — costs that rise with sales but sit outside COGS, such as percentage-of-revenue referral fees and customer care.
P
- 📝PEO — a Professional Employer Organization, paid by a company to serve as the employer of record for its employees.
- 📝Profit and Loss Statement — the P&L, a financial statement summarizing revenues, costs, and expenses over a period, conventionally a quarter or fiscal year rather than a week.
R
- 📝Roll-Forward — the recognition that a starting balance plus or minus the period's changes equals the ending balance, the basis of a balance sheet forecast.
S
- 📝Stock Options — the right, but not the obligation, to buy company stock at a set price, the traditional way venture-backed companies let employees build equity.
- 📝Strategic Transaction — a transaction that changes a company's capital or ownership, such as raising capital, acquiring a company, or selling the company.
T
- 📝Tops Down — budgeting that starts from 📝Boundary Conditions for growth targets and runway, then sets the level of expenses the company can sustain.
- 📝Transaction Downloads — the bank and card transactions QuickBooks Online downloads automatically, whose efficient handling is the most basic form of bookkeeping.
Z
- 📝ZAAP — short for Z Accepted Accounting Principles, the accounting principles BrightZen Systems considers reasonable for startups.