The Business Owner’s Glossary: 10 Accounting Terms You Must Know to Master Your Numbers

Notre équipe
Dec 4, 2025
3 min read

Accounting is often called "the language of business." Yet, for many entrepreneurs and managers, that language can sometimes feel like total gibberish.

Have you ever nodded along during a meeting with your accountant without really understanding the difference between an "asset" and an "expense"? You are not alone. Understanding the basics isn't just about tax compliance; it is a powerful tool for making better strategic decisions.

Here are the 10 essential accounting terms you absolutely need to know to steer your business with confidence.

1. The Foundation: The Balance Sheet

The Balance Sheet is a snapshot of your business's financial health at a specific point in time (usually at the end of the year).

Assets

This is everything the company owns that has economic value.

Examples: Cash in the bank, computers, inventory, patents, or money your clients owe you.

Liabilities

This is everything the company owes to others. It represents your debts.

Examples: Bank loans, unpaid supplier invoices, taxes due.

Equity (or Owner’s Equity)

This is the net value of the company. If you sold all your assets to pay off all your debts, equity is what would remain in the pockets of the owners or shareholders.

The Golden Rule:

$$Assets = Liabilities + Equity$$

2. The Performance: The Income Statement (Profit & Loss)

Unlike the Balance Sheet (which is a photo), the Income Statement is a movie that shows what happened over a specific period (a year, a quarter).

Revenue (or Sales)

This is the total amount of money generated by the sale of goods or services before any expenses are deducted.

Note: High revenue doesn't necessarily mean the company is rich!

Expenses

These are the costs incurred to operate the business.

Fixed Expenses: Rent, insurance (costs that stay the same regardless of sales).
Variable Expenses: Raw materials, commissions (costs that go up as sales go up).

Net Income (The Bottom Line)

This is the most important number at the bottom of the document. It is what remains once you have subtracted all expenses (including taxes) from your revenue.

If the number is positive: Profit.
If the number is negative: Loss.

3. Daily Management: Cash & Future

Cash Flow

This is the actual liquid money moving in and out of your business.

Key Concept: A business can be profitable (on paper) but go bankrupt due to a lack of cash flow (not enough money right now to pay payroll). Profit is theory; cash is reality.

Accounts Receivable (AR)

This is money that your customers owe you for goods or services already delivered. As long as the client hasn't paid, it is a receivable. Strict management of AR is vital for maintaining cash flow.

Accounts Payable (AP)

This is money you owe to your suppliers. Managing this payment timeline allows you to keep cash in the business a little longer.

Depreciation

This is the reduction in value of an asset (like a car or a machine) over time.

Why does it matter? Instead of recording the cost of a $10,000 machine as an expense all at once, you spread that cost over its useful life (e.g., 5 years). This smoothes out the company's financial results.

In Summary

Mastering these terms allows you to move from being a "spectator" to being the "pilot" of your business. Don't let the numbers intimidate you. Ask your accountant questions and use these indicators to anticipate the future rather than simply reacting to the past.