Bookkeeping Glossary — Plain-English Definitions

Clear, citable definitions of bookkeeping and accounting terms for small-business owners.

• What is Accounts Payable?

  Accounts Payable (AP) is the short-term liability a business records when it buys goods or services on credit from a supplier. It represents money owed — typically due within 30 to 90 days — and appears on the balance sheet under current liabilities. Managing AP well protects cash flow and supplier trust.

• What is Invoice Processing?

  Invoice processing is the complete workflow a business follows to handle a supplier invoice from receipt to payment: capture the data, verify it against the purchase order and goods received, route it for approval, post it to the ledger, and execute payment. It is the operational backbone of Accounts Payable.

• Bookkeeping vs Accounting: What’s the Difference?

  Bookkeeping is the systematic recording of every financial transaction — sales, purchases, receipts, payments — into the ledger so the books balance. Accounting takes that verified data and interprets it: preparing financial statements, filing taxes, advising on strategy, and auditing. Bookkeeping is the foundation; accounting is the analysis built on top of it.

• What is Petty Cash Management?

  Petty cash is a small reserve of physical currency — typically kept in a locked box — that a business maintains to pay for low-value expenses where a card or bank transfer is impractical: stamps, taxi fares, office snacks, minor supplies. Petty cash management is the system of controlling that float: setting a limit, recording every withdrawal, collecting receipts, and reconciling the box to the ledger.

• What is Input VAT?

  Input VAT (input tax) is the value-added tax a VAT-registered business pays on the goods and services it buys for its operations. It appears on supplier invoices as a separate tax line. The business can usually reclaim this input tax from the tax authority, offsetting it against the output VAT it charges on its own sales — paying the tax authority only the net difference.

• What is a Chart of Accounts?

  A Chart of Accounts (COA) is the structured, numbered list of every account a business uses to record its financial transactions. It is the index of the general ledger: each account has a unique code and a name, grouped by type — assets, liabilities, equity, income, and expenses. Every bookkeeping entry posts to one or more accounts in the COA, which is why getting the structure right from day one matters.

• What is Accounts Receivable?

  Accounts Receivable (AR) is the short-term asset a business records when it delivers goods or services to a customer on credit, before the customer has paid. It represents money owed — typically due within 30 to 90 days — and appears on the balance sheet under current assets. Effective AR management is the single biggest lever on a small business’s cash flow.

• What is Double-Entry Bookkeeping?

  Double-entry bookkeeping is the accounting method in which every financial transaction is recorded in at least two accounts — as a debit in one and an equal credit in another — so that total debits always equal total credits. This dual effect keeps the accounting equation (Assets = Liabilities + Equity) in balance and is the foundation of every modern bookkeeping system, in use since the 15th century.