Understanding your numbers
A working vocabulary for your next accounting conversation.
Use these brief definitions to follow the discussion and ask better questions. A term's treatment in your books or tax return still depends on the facts and the reporting method.
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The records and the monthly routine.
These terms describe how information is organized and checked. Ask which step has actually been completed when a report or account is described as current.
- Chart of accounts: the categories used to organize entries in the accounting system.
- General ledger: the detailed accounting record of transactions grouped by account.
- Reconciliation: comparing records and explaining differences, often between an account in the books and its statement.
- Monthly close: the agreed review process for completing a month's accounting records.
- Source document: a statement, invoice, receipt, or other record supporting an entry.
The balances and financial reports.
Read these terms alongside the report date. A balance at one point in time and activity over a period answer different questions.
- Asset: a resource owned or controlled by the business, such as cash or equipment.
- Liability: an obligation the business owes.
- Equity: the owners' residual interest after liabilities are deducted from assets.
- Accounts receivable: amounts customers owe the business.
- Accounts payable: amounts the business owes suppliers.
- Profit and loss: a report of revenue and expenses over a stated period.
The work and its boundaries.
A good engagement uses these terms precisely. Ask for a concrete description when the boundary between two tasks is unclear.
- Catch-up work: bringing incomplete historical periods up to an agreed point.
- Scope: the work, periods, entities, responsibilities, and exclusions agreed for an engagement.
- Handoff: the transfer of completed work, supporting information, and open questions to the next responsible person.
- Projection: a forward-looking estimate based on stated assumptions, not a guaranteed result.
Official sources
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Text Lily or Andrey, or use the form. A short description is enough to start; attachments are optional.
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