Accounting for Non-Accountants

There is no part of my business that causes me more confusion and stress than the accounting
and bookkeeping part.  Through the years, I have found this to be true with the majority of
coaches that I have worked with as well.  I think I have mastered the basics by twisting my
brain in ways that it doesn’t like to go and today I would like to give you some basic
accounting definitions to ease your business journey.

Bookkeeping – the process of inputting data about money in your business.  You need to make
sure to keep track of the amount, date and source of all your money coming in (revenue)
and money going out (expenses).

Accounting – the overall process of tracking the finances of your business.  It includes
bookkeeping and also other tracking processes, calculations and status reports on the
financial and tax status of your business.

Gross income – All the money taken into your business during a certain period of time.

Net income – Term for the profit of your business.  It is the gross income minus any expenses.

Receipt – a written record of a transaction that is usually given to a customer to show payment made.

Invoice – a written record of a transaction that is usually given to a customer to show payment due.

Accounts payable – money that your business owes.  One way to remember the name is
that it is the money that you must PAY.  Accounts payable includes bills you have,
credit card purchases, etc. 

Accounts receivable – money that is owed to your business.  Remember the name because
it is money you are going to RECEIVE.  Accounts receivable are any amounts due you for
services or products sold on credit.

Assets – things of value that your company owns.  Often includes bank accounts, accounts receivable,
tangible property such as computers, and intangible items such as patents, trademarks and goodwill. 

Liabilities – these are the financial obligations of your company.  Typically included are
accounts payable and loans.

Owner’s equity – the difference between the business assets and liabilities. 

Balance sheet – the report listing the business’ assets, liabilities, net worth and equity.
It is a status report of the financial resources of the business at any given time. 
Like a snapshot of the business from start to present day.

Income statement – shows the flow of money in and out of the business over a stated
period of time.  Also called the Profit and Loss Statement, this report tracks both
revenue and expenses.  You can designate whatever time period works best for this statement.
Don’t let any of this throw you.  You have just learned all the terminology you need to understand
the finances of your business.  All those complicated maneuvers come down to these basics
so you really can handle it.  Look for Part 2 of this article where we will discuss a few concepts
to round out your accounting education. 

About the author – Janet Slack of Life Adventure Coaching is a specialist in helping coaches
and other solopreneurs create the thriving business of their dreams.  
Sign up for her free newsletter Biz Tips for Coaches or visit her blog.