Bookkeeping Glossary

Bookkeeping Glossary for Canadian Small Businesses

Here's a comprehensive bookkeeping glossary tailored for Canadian small businesses:

A

• Accounts Payable (AP): The money a business owes to suppliers or creditors for goods and services received but not yet paid for.

• Accounts Receivable (AR): The money owed to a business by customers for goods or services provided on credit.

• Accrual Accounting: A method of accounting where revenues and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

• Assets: Resources owned by a business that have economic value, such as cash, equipment, and accounts receivable.

B

• Balance Sheet: A financial statement summarizing a company's assets, liabilities, and equity at a specific point in time.

• Bank Reconciliation: The process of matching a business’s accounting records with its bank statements to ensure accuracy.

• Bookkeeping: The process of recording financial transactions, including purchases, sales, receipts, and payments.

• Budgeting: Planning and managing a company’s financial resources to meet its goals and obligations.

C

• Canada Revenue Agency (CRA): The federal agency responsible for administering tax laws and collecting taxes in Canada.

• Capital Assets: Long-term assets such as buildings, land, and equipment used in a business to generate income.

• Cash Flow: The movement of money in and out of a business, tracking liquidity and financial health.

• Chart of Accounts: A structured list of all accounts used in a business’s financial system to categorize transactions.

• Cost of Goods Sold (COGS): The direct costs of producing goods sold by a business, including materials and labor.

D

• Debit: An entry that increases asset or expense accounts and decreases liability or equity accounts.

• Depreciation: The process of allocating the cost of a tangible asset over its useful life.

• Double-Entry Accounting: An accounting method where every transaction affects at least two accounts, ensuring the accounting equation stays balanced.

• Drawings: Withdrawals made by business owners from the company’s funds for personal use.

E

• Equity: The owner’s residual interest in the business after deducting liabilities from assets.

• Expenses: The costs incurred by a business in its operations, such as rent, utilities, and wages.

F

• Fiscal Year: A 12-month period used for financial reporting and taxation purposes.

• Fixed Assets: Long-term tangible assets such as machinery, real estate, and equipment.

• Fixed Costs: Business expenses that remain constant, such as rent and insurance.

G

• General Ledger (GL): A comprehensive record of all a company’s financial transactions.

• Gross Profit: Revenue minus the cost of goods sold before deducting operating expenses.

H

• Harmonized Sales Tax (HST): A consumption tax that combines federal and provincial sales taxes in certain Canadian provinces.

I

• Income Statement: A financial report that summarizes revenues, expenses, and net income over a specific period.

• Inventory: Goods and materials a business holds for sale to customers.

• Invoice: A document issued to a customer requesting payment for goods or services provided.

J

• Journal Entry: A record of a financial transaction in the accounting system.

L

• Liabilities: Debts or obligations a business owes to others, such as loans and accounts payable.

• Liquidity: The ability of a business to meet its short-term financial obligations.

M

• Markup: The amount added to the cost price of goods to determine the selling price.

• Matching Principle: The accounting principle that expenses should be recorded in the same period as the revenues they help generate.

N

• Net Income: The profit remaining after all expenses have been deducted from revenue.

• Non-Current Assets: Long-term investments or assets not easily converted to cash within a year.

O

• Operating Expenses: The costs associated with running a business, excluding COGS.

• Overhead: Ongoing business expenses not directly related to production, such as rent and utilities.

P

• Payroll: The process of calculating and distributing wages to employees.

• Petty Cash: A small amount of cash kept on hand for minor expenses.

• Profit and Loss Statement (P&L): Another term for an income statement.

Q

• Quick Ratio: A financial metric that measures a company’s ability to meet short-term obligations using liquid assets.

R

• Reconciliation: The process of ensuring that two financial records are consistent and accurate.

• Retained Earnings: The cumulative profit a business keeps after distributing dividends.

• Revenue: The total income a business earns from its operations.

S

• Sales Tax: A government-imposed tax on the sale of goods and services.

• Shareholder’s Equity: The net worth of a company belonging to its owners after liabilities are deducted.

• Single-Entry Accounting: A simple bookkeeping method where each transaction is recorded only once.

• Statement of Changes in Equity: It provides a detailed account of the changes in a company's equity over a specific period.

T

• Tax Deduction: Expenses that can be deducted from taxable income to reduce tax liability.

• Trial Balance: A report that lists all general ledger accounts to check for errors in bookkeeping.

U

• Unearned Revenue: Money received before goods or services are provided.

V

• Variable Costs: Expenses that change based on business activity levels.

• Vendor: A supplier of goods or services.

W

• Working Capital: The difference between current assets and current liabilities, indicating financial health.

• Write-Off: A reduction in an asset’s value or an expense recognized due to non-payment.

Y

• Year-End Closing: The process of finalizing a company’s financial records at the end of a fiscal year.

This glossary provides essential bookkeeping terms to help Canadian small business owners navigate their financial management effectively.

QuickBooks Online Glossary

Here’s a QuickBooks Online Glossary to help you understand key terms related to the platform:

A

• Account – A category used to track financial transactions (e.g., income, expenses, assets, liabilities).
• Accounts Payable (A/P) – Money your business owes to vendors or suppliers.
• Accounts Receivable (A/R) – Money customers owe your business for goods or services provided.
• Accrual Accounting – A method where revenue and expenses are recorded when incurred, not when cash is received or paid.
• Asset – Anything of value owned by the business, such as cash, equipment, or inventory.

B

• Balance Sheet – A financial statement that shows a company’s assets, liabilities, and equity at a specific point in time.
• Bank Feed – A feature that connects your bank or credit card to QuickBooks to automatically import transactions.
• Bank Reconciliation – The process of matching transactions in QuickBooks to those in your bank statement.
• Bill – A record of money owed to a vendor for goods or services received.
• Budget – A financial plan that outlines expected income and expenses over a period.

C

• Cash Basis Accounting – A method where revenue and expenses are recorded when cash is received or paid.
• Chart of Accounts (COA) – A list of accounts used to categorize financial transactions in QuickBooks.
• Class Tracking – A way to categorize transactions by department, location, or type of business activity.
• Credit Memo – A document issued when a business refunds or credits a customer.
• Customer – A person or business that purchases goods or services from you.

D

• Dashboard – The home screen in QuickBooks Online that provides an overview of your business’s financial health.
• Deposit – Money received and recorded in QuickBooks.
• Double-Entry Accounting – A bookkeeping system where every financial transaction affects at least two accounts.

E

• Employee – A worker paid through payroll who receives wages and has taxes deducted.
• Equity – The owner’s financial interest in the business (e.g., retained earnings, capital contributions).
• Estimate – A preliminary invoice sent to a customer before work is completed or goods are delivered.
• Expense – Costs incurred by a business to generate revenue (e.g., rent, salaries, utilities).

I

• Income Statement (Profit & Loss Statement) – A report showing revenue, expenses, and net income over a period.
• Inventory – Goods a business holds for sale.
• Invoice – A document sent to a customer requesting payment for goods or services.

J

• Journal Entry – A manual way to record financial transactions, typically used for adjustments.

L

• Liability – Money a business owes (e.g., loans, unpaid bills, taxes).
• Loan – Borrowed money that must be repaid with interest.

M

• Merchant Services – QuickBooks’ payment processing system for accepting credit card payments.
• Mileage Tracking – A QuickBooks feature that records business travel mileage for tax deductions.

P

• Payroll – The system for paying employees and tracking wages, taxes, and deductions.
• Product/Service List – A list of items and services a business sells in QuickBooks.
• Profit & Loss Report – See Income Statement.
• Purchase Order (PO) – A document sent to a supplier to request goods or services.

R

• Reconciliation – The process of matching transactions in QuickBooks with bank or credit card statements.
• Recurring Transactions – Automated transactions (e.g., rent payments, invoices) set to repeat regularly.
• Retained Earnings – The accumulated profits of a business not yet distributed to owners.

S

• Sales Receipt – A record of a completed sale where payment was received immediately.
• Sales Tax – Tax collected on sales and remitted to the government.
• Statement – A summary of a customer’s account activity, including invoices and payments.
• Subscription – The QuickBooks Online service plan a business pays for.

T

• Tax Liability – The amount of taxes a business owes.
• Trial Balance – A report that checks the accuracy of debits and credits in accounting records.
• Transaction – Any financial activity recorded in QuickBooks (e.g., invoices, payments, expenses).

V

• Vendor – A person or company that provides goods or services to your business.

E-commerce Bookkeeping & Sales Tax Glossary

This glossary covers key terms related to e-commerce bookkeeping and sales tax, helping you as an online seller to manage your financial records effectively.

A

• Accounting Period – A specific time frame for financial reporting (e.g., monthly, quarterly, yearly).
• Accounts Payable (A/P) – Money owed to suppliers, vendors, or service providers.
• Accounts Receivable (A/R) – Money owed to your business by customers for completed sales.
• Accrual Accounting – An accounting method where income and expenses are recorded when they occur, not when cash is exchanged.
• Affiliate Revenue – Income earned from promoting other companies' products via affiliate marketing programs.
• Automated Clearing House (ACH) – A system for electronic payments, often used for supplier payments and direct deposits.

B

• Balance Sheet – A financial statement showing assets, liabilities, and equity at a given time.
• Break-even Point – The sales level at which revenue equals costs, meaning no profit or loss.
• Buy Box – The prominent "Add to Cart" button on Amazon; winning the Buy Box increases sales.
• Business-to-Business (B2B) – Sales between businesses (e.g., wholesalers selling to retailers).
• Business-to-Consumer (B2C) – Sales from businesses directly to consumers.

C

• Cash Basis Accounting – A method where revenue and expenses are recorded only when money is received or paid.
• Chargeback – A disputed transaction where a customer requests a refund from their bank or credit card provider.
• Cost of Goods Sold (COGS) – The direct costs of producing or purchasing products for sale, including materials, manufacturing, and shipping.
• Cross-border Sales – E-commerce transactions between buyers and sellers in different countries.
• Currency Conversion Fee – A charge applied when converting foreign currency transactions to a business’s local currency.

D

• Dropshipping – A fulfillment model where a seller does not keep inventory but transfers orders to a supplier who ships products directly to the customer.
• Duty (Import Duty) – A tax imposed on imported goods by customs authorities.

E

• eBay Managed Payments – eBay’s in-house payment processing system.
• E-commerce Platform – Software or services (e.g., Shopify, Amazon, WooCommerce) that enable online selling.
• Electronic Funds Transfer (EFT) – Digital transfer of money between banks, often used for vendor payments.
• Estimated Tax Payments – Quarterly payments required by self-employed individuals to cover income and sales tax.

F

• Fulfilled by Amazon (FBA) – Amazon’s fulfillment service where sellers store products in Amazon warehouses, and Amazon handles shipping and customer service.
• Fulfillment Center – A warehouse where orders are packed and shipped.
• Fulfillment by Merchant (FBM) – A fulfillment method where the seller stores and ships products directly to customers.
• Foreign Exchange (Forex) Fee – A charge applied when processing transactions in a different currency.

G

• Gross Profit – Revenue minus COGS, showing the profit before expenses.
• Gateway Fee – A fee charged by payment processors like PayPal or Stripe for handling transactions.

I

• Inventory Turnover Ratio – A measure of how quickly inventory is sold and replaced.
• Invoice – A document sent to customers requesting payment for a sale.

L

• Landing Page – A standalone web page designed to convert visitors into buyers.
• Liability – Any financial obligation a business owes, such as loans or unpaid vendor invoices.
• Listing Fees – Fees charged by e-commerce platforms (e.g., Etsy, eBay) for listing products.

M

• Marketplace Facilitator Laws – Regulations requiring platforms like Amazon and eBay to collect and remit sales tax on behalf of sellers.
• Merchant Account – A type of bank account that allows businesses to accept credit card payments.
• Merchant Processing Fee – A charge applied by payment processors for handling transactions.
• Multi-Channel Selling – Selling products across multiple platforms (e.g., Amazon, Shopify, Walmart).

N

• Net Profit – The remaining profit after deducting all business expenses from revenue.
• Nexus (Tax Nexus) – A legal connection between a business and a state or country that requires it to collect and remit sales tax.

P

• Payment Gateway – A service (e.g., Stripe, PayPal) that processes credit card payments online.
• Payroll Taxes – Taxes businesses must withhold from employee wages and remit to tax authorities.
• Profit Margin – A percentage that indicates how much profit is earned per dollar of sales.

R

• Reconciliation – Matching financial records (bank statements, sales reports) with bookkeeping entries.
• Refund Policy – A business policy outlining conditions for customer refunds.
• Return on Investment (ROI) – A measure of profitability from an investment, calculated as (Profit ÷ Cost) × 100%.

S (Sales Tax Terms)

• Sales Tax – A tax imposed on retail sales that is collected by the seller and remitted to the government.
• Sales Tax Exemption – A condition where certain buyers (e.g., non-profits, resellers) do not have to pay sales tax.
• Sales Tax Permit – A license allowing businesses to collect sales tax.
• Sales Tax Rate – The percentage of sales tax applied to a transaction, which varies by location.
• Sales Tax Remittance – The process of sending collected sales tax to tax authorities.
• Sales Tax Threshold – The amount of revenue or sales that triggers a requirement to collect and remit sales tax in a particular state or country.
• State Sales Tax – A tax imposed by individual U.S. states on certain sales.
• VAT (Value-Added Tax) – A tax applied at each stage of production and sale, common in Europe and Canada.

T

• Taxable Sales – Sales that are subject to sales tax.
• Third-Party Logistics (3PL) – A company that handles inventory storage, packing, and shipping for e-commerce sellers.
• Transaction Fee – A charge for processing payments, usually taken by payment processors like PayPal or Stripe.

U

• Unfulfilled Orders – Orders that have been placed but not yet shipped.
• Use Tax – A tax paid on purchases where sales tax was not collected at the time of sale (e.g., buying from an out-of-state vendor).

V

• Vendor – A supplier or manufacturer that provides goods or services to an e-commerce business.
• Void Transaction – A canceled transaction before it is fully processed.

W

• Wholesale – Selling products in bulk, often at discounted rates, to other businesses or retailers.
• Write-Off – A business expense that reduces taxable income.

E-commerce Inventory Management Glossary

This glossary includes key terms related to e-commerce inventory management, helping online sellers streamline operations and improve efficiency.

A

• ABC Analysis – A method of categorizing inventory based on value and sales frequency, with "A" being high-value items and "C" being low-value, slow-moving items.
• Automatic Replenishment – A system that automatically orders inventory when stock reaches a certain level.
• Available Inventory – The stock that is ready for sale and not reserved for pending orders.
• Average Inventory – The mean stock level over a specific period, calculated as (Beginning Inventory + Ending Inventory) / 2.

B

• Backorder – A situation where a product is temporarily out of stock but will be available for future fulfillment.
• Barcode – A machine-readable label containing product information for inventory tracking.
• Batch Picking – A fulfillment method where multiple orders with similar items are picked together to improve efficiency.
• Bill of Materials (BOM) – A list of raw materials, components, and assembly instructions needed to manufacture a product.
• Buffer Stock (Safety Stock) – Extra inventory kept to prevent stockouts due to supply chain disruptions or demand fluctuations.
• Bundling – Selling multiple products together as a package deal.

C

• Carrying Cost (Holding Cost) – The total expense of storing unsold inventory, including warehousing, insurance, depreciation, and obsolescence.
• Centralized Inventory – A system where all inventory is stored in a single location.
• Cost of Goods Sold (COGS) – The direct costs of producing or purchasing products sold during a given period.
• Cross-Docking – A logistics practice where incoming inventory is directly transferred to outbound shipments without long-term storage.
• Cycle Count – A method of continuously counting a portion of inventory instead of conducting full physical inventory checks.

D

• Dead Stock – Inventory that has not sold for an extended period and is unlikely to be sold in the future.
• Demand Forecasting – Using historical sales data and market trends to predict future inventory needs.
• Dropshipping – A fulfillment model where the retailer sells products without holding inventory, instead transferring orders to a supplier who ships directly to the customer.
• Dynamic Inventory – A real-time inventory tracking system that updates as stock levels change.

E

• Economic Order Quantity (EOQ) – A formula that determines the optimal order quantity to minimize holding and ordering costs.
• Electronic Data Interchange (EDI) – A system that allows businesses to electronically exchange inventory and order information.
• End-of-Life (EOL) Inventory – Products that are being phased out and will no longer be restocked.
• Enterprise Resource Planning (ERP) – A system that integrates various business processes, including inventory management, finance, and supply chain.

F

• FIFO (First In, First Out) – An inventory management method where the oldest stock is sold first.
• Freight Cost – The expense of shipping inventory from suppliers to warehouses or customers.
• Fulfilled by Amazon (FBA) – Amazon’s fulfillment service where sellers store inventory in Amazon warehouses, and Amazon handles packing and shipping.
• Fulfillment by Merchant (FBM) – A fulfillment method where the seller stores, packs, and ships inventory directly to customers.
• Forecasting Accuracy – A measure of how close demand predictions are to actual sales.

G

• Gross Margin Return on Investment (GMROI) – A metric that evaluates how much profit is made from inventory investments.
• Goods Received Note (GRN) – A document used to confirm the receipt of goods in a warehouse.

H

• Holding Cost (Carrying Cost) – See Carrying Cost.
• Hub-and-Spoke Distribution – A model where inventory is stored in central warehouses (hubs) and then distributed to smaller locations (spokes).

I

• Inventory Control – The process of managing stock levels to prevent overstocking or stockouts.
• Inventory Shrinkage – The loss of inventory due to theft, damage, miscounting, or fraud.
• Inventory Turnover – The number of times inventory is sold and replaced during a given period, calculated as COGS ÷ Average Inventory.
• Inventory Valuation – Methods used to calculate the value of stock, such as FIFO, LIFO, or Weighted Average Cost.

J

• Just-in-Time (JIT) Inventory – A system where inventory is restocked only when needed, reducing holding costs but increasing supply chain risk.

K

• Key Performance Indicators (KPIs) – Metrics used to measure inventory performance, such as stock turnover, fill rate, and order accuracy.
• Kit (Kitting) – A process where multiple items are pre-packaged together as a single SKU.

L

• Lead Time – The time between placing an inventory order and receiving it.
• LIFO (Last In, First Out) – An inventory method where the most recently received stock is sold first.
• Lot Tracking – The process of tracking inventory batches for quality control and recall purposes.

M

• Minimum Order Quantity (MOQ) – The smallest quantity of a product a supplier will sell per order.
• Multi-Channel Inventory Management – A system that tracks stock across multiple sales channels (e.g., Amazon, Shopify, eBay).

O

• On-Demand Inventory – A strategy where inventory is stocked based on real-time demand rather than forecasts.
• Order Fulfillment – The process of receiving, packing, and shipping customer orders.
• Order Management System (OMS) – Software that automates order tracking and fulfillment across multiple channels.
• Overstock – Excess inventory that exceeds demand.

P

• Packing Slip – A document included in shipments listing the items inside.
• Par Level Inventory – The minimum stock level needed to meet customer demand without running out.
• Perpetual Inventory System – A real-time inventory tracking method that updates automatically as stock changes.
• Physical Inventory Count – A manual process of counting all stock in a warehouse.

R

• Reorder Point – The stock level at which new inventory should be ordered to prevent stockouts.
• Returns Management – The process of handling product returns and restocking inventory.
• RFID (Radio Frequency Identification) – A technology that uses radio waves to track inventory.

S

• Safety Stock – See Buffer Stock.
• Sales Velocity – The speed at which products are sold over a given period.
• Seasonal Inventory – Stock that sells primarily during certain times of the year (e.g., holiday decorations).
• Serial Number Tracking – The process of tracking individual product units via unique serial numbers.
• SKU (Stock Keeping Unit) – A unique identifier assigned to each product for inventory tracking.
• Stockout – A situation where a product is out of stock and unavailable for sale.
• Supplier Relationship Management (SRM) – A strategy for maintaining good relationships with vendors.

T

• Third-Party Logistics (3PL) – A company that handles warehousing, picking, packing, and shipping for e-commerce sellers.
• Turnover Rate – See Inventory Turnover.

U

• Universal Product Code (UPC) – A barcode assigned to products for tracking and sales.
• Unsellable Inventory – Stock that cannot be sold due to damage, expiration, or obsolescence.

W

• Warehouse Management System (WMS) – Software that manages warehouse operations, including inventory tracking, picking, and shipping.
• Wholesale Inventory – Bulk products purchased for resale.

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