Bean Counting 101 Glossary of Terms

Account. An item on the Chart of Accounts. Each item is either an Asset, Liability, Equity, Income, or Expenses, each with a unique name and number.

Accrual Accounting The method of accounting where income and expenses are recognized in the period (the month or year) they occur.

Balance Sheet A report showing Assets, Liabilities, and Equity as of a certain point in time. Assets = Liabilities + Equity.

Batch A temporary file containing transactions such as Accounts Payable Invoices, Accounts Receivable Billings, Payroll Timesheets, etc. The temporary file holds these transactions until their accuracy is verified (edited) and then they are Posted. The posting clears the transactions out of the temporary file and transfers them to the permanent files.

Books A traditional expression dating from the time when green-visored accountants with bow ties listed all business transactions in a series of books called journals and ledgers.

Budget That set of numbers that was once the estimate of the job’s cost. It can be amended by using Change Orders. Actual costs are compared to budgets to keep track of whether the job is profitable and, if not, where and why. This is the secret to successful job costing.

Cash Accounting The method of accounting where income is recognized when it is received and expenses are recognized when they are paid.

Cash Flow The Cash received by the business, net of the Cash paid out by the business. If we receive more Cash than we pay out, we have a positive Cash Flow.

Change Orders Amendments to original construction agreements that reflect a change in what is being built and therefore a change is what will be billed.

Chart of Accounts A list of all Accounts.

Closing the books The process of compiling totals and transferring balances to the General Ledger. The process is done monthly or annually.

Closing the year The process of taking the reversing income and expenses into a single net figure and adding it to Retained Earnings on the Balance Sheet.

Cost Codes A numbering system used by estimators and accounts that distinguishes phases of a job. Cost Codes allow the estimators and the accountants to "talk the same language" as they discuss what is happening on a job versus what was supposed to happen.

Credit A negative (-) accounting entry. Debts, Accounts Payable, Loans, Equity, Profit, and Income are common Credits.

Debit A positive (+) accounting entry. Cash, Accounts Receivable, Inventory, Fixtures and Equipment, and Expenses are common Debits.

Depreciation A non-cash expense. The process of writing down the value of an asset as it wears out. There are several methods of depreciation, depending on the tax strategy preferred by the CPA.

Double Entry Bookkeeping The accounting process that has offsetting debit and credit transactions. For example, a cash sale generates a Debit to Cash and an equal Credit to Sales. Part two of the example would be a Debit to Cost of Goods Sold and a Credit to Inventory on Hand.

Estimators Those visionary individuals responsible for looking at a job and figuring out how many labor hours each phase will take, how many studs go into a wall, how many pieces of sheet rock are needed and how much each of these items is going to cost. An estimator takes an idea or a set of drawings and figures out how long it will take to make it a reality.

Financial Statement A financial report as of a certain date that includes a Balance Sheet and a Profit and Loss.

General Ledger A book that keeps summaries of all transactions.

Hand Check Also known as a Hand Written Check. An Accounts Payable Check or Payroll Check, written by hand and later entered into the accounting system.

Income Statement The Profit and Loss Statement.

Job Cost Accounting An industry specific accounting process that accumulates actual job costs as they occur and compares them to budgeted amounts. When the process is done properly (such as with this job cost accounting software), the cost to complete is forecast in advance.

Journal Literally, a "book" used to list transactions. Sales, Accounts Payable and Accounts Receivable are examples of Journals. When these books are "closed", their balances are transferred or "posted" to the General Ledger.

Master Account A special Account on the Chart of Accounts which totals Subsidiary Accounts. Master Accounts appear on the Financial Statement. Subsidiary Accounts do not.

Posting The process of transferring accounting transactions from a temporary journal to a permanent ledger. Temporary transactions are saved in "Batches" as they are entered, proof read (edited), and corrected. When the temporary information is approved, it is transferred from the temporary Batch into the various permanent files.

Profit & Loss (P&L) The Profit and Loss Statement or Income Statement. A report showing all of the income and expenses during a given period or range of dates. Typically, a Profit & Loss Statement will show one column with Year-to-Date figures and a second column for Quarter-to-Date or Month-to-Date.

Repeating Batch A temporary Batch used to save transactions that can be Posted over and over. A Repeating Batch in Accounts Payable for Rent could be posted over and over, being changed only when Rent increases. Repeating Batches are available in the Preferred Edition.

Retained Earnings The accumulated Profit or Loss as of the last time the books were closed.

Subsidiary Account An Account on the Chart of Accounts which is totaled into a Master Account. Subsidiary Accounts do not appear on Financial Statements. Master Accounts do.

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