Common bookkeeping terms and what they mean

At AMR Bookkeeping Solutions we are always looking for ways to help make things easier for our clients. Whether it’s providing advice about payroll, assisting you with auto enrolment or managing your VAT returns, we understand that sometimes the terminology associated with bookkeeping can be somewhat confusing.

Here, we’ve put together a list of the most common bookkeeping terms along with what they mean.

Accounts payable

The amount of money your company owes your creditors, e.g. suppliers, in return for any goods and services bought by the company.

Common bookkeeping terms and what they mean - blue background with question marks

Accounts receivable

The amount of money owed by customers or clients to your company after they have received your goods or services.

Auto enrolment

Auto enrolment refers to the government initiative which is aiming to help more people save for their retirement through a workplace pension scheme. It is compulsory for employers to automatically enrol any eligible personnel into a pension scheme and contribute towards it. You can find out more about this on our blog here.

Balance sheet

A financial statement listing a company’s assets, liabilities and owner or stockholder equity. A balance sheet will provide an insight into a company and its operations.

Bank reconciliation

The process of matching bank payments and deposits on a company’s bank statement with a company’s bookkeeping records.


This refers to a company’s financial assets or the value of a financial asset, such as cash or goods. Working capital is calculated by subtracting a company’s current assets from its current liabilities.

Cash flow

This refers to what is going in to and out of your company’s bank account. You can find out more about how to manage your cash flow on our blog here.

Credit control

This refers to the practice of making sure you are being paid on time by your customers. This includes raising invoices and invoice reminders. You can find out more about credit control and credit management in our blog Do you need a credit management health check?


A credit is used in bookkeeping in order for books to balance. A credit increases liability, revenue or equity accounts and decreases asset or expense accounts.


A debit is the reverse of a credit. It will decrease liability, revenue or equity accounts and increase asset or expense accounts.


This refers to a person or company that your company owes money to.


Debtors are people or companies that owe your company money.


An expense is money spent or a cost incurred by a business to generate revenue that is not directly related to the sale of individual goods or services. Common examples include payments to employers, employee wages, office leases and equipment. Some expenses can be offset against your tax bill.


These refer to debts a company owes, such as business loans and unpaid bills.

Net income

A company’s total earnings after its total expenses have been deducted. It is also referred to as net profit.

Profit and loss statement

This summarises a company’s performance and financial position, providing information about costs, expenses and revenues over a certain period.

Return on investment

This evaluates the financial performance in relation to the amount of money invested. It is calculated by dividing a company’s net profit with the cost of its investment.


This refers to the money collected as a result of selling a company’s goods or services, interest earned on savings or the sale of a company’s assets.


An acronym for Value Added Tax, VAT is a government tax on goods and services, and is based on the increase in value of a product or service at each stage of production and distribution. You can find out more about VAT on our blog How much do you know about VAT?

Here at AMR we are experts at helping businesses of all sizes with their bookkeeping requirements. If you have any questions about the contents of this blog, or you need professional bookkeeping advice, our friendly team will be happy to assist you. Get in touch and find out how we can help you and your business.

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Why choose AMR Bookkeeping Solutions?


We combine the highest level of professionalism with a friendly, clear approach for all of our clients.


Our approach is tailored to the needs of each individual client, and we build personal relationships to make sure that our clients can have complete trust in what we do.

AAT Qualified

All of our services are provided by our team of Association of Accounting Technicians (AAT) qualified bookkeepers, highly experienced bookkeeping experts and certified accountants.

CPD Trained

Each member of the team undergoes Continuing Professional Development (CPD) which keeps them right up to date with changing tax legislation.

Accredited Experts

All our bookkeepers are accredited in leading accountancy software Sage, Xero and QuickBooks.

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Get in touch for a free, no obligation consultation

Find out how AMR Bookkeeping Solutions can provide the right support for your business, send us your details and one of our experts will get in touch with you without delay.

Alternatively, you are welcome to contact us by phone on 01892 559480

You can also pop into our offices in Tonbridge.