6 Bookkeeping Terms Every Founder Should Actually Understand
Sam's List Editorial | 2026-06-27
6 Bookkeeping Terms Every Founder Should Actually Understand You do not need to be an accountant to run a business, but you do need to understand a handful of terms well enough to read your own numbers. Founders who treat their financials as a foreign language make decisions blind. Here are six bookkeeping terms every founder should actually understand, in plain language with examples. Learn these six and most financial conversations stop being intimidating. You will know what your bookkeeper is talking about and, more importantly, what your reports are telling you. 1. Accrual vs. Cash Accounting Cash accounting records money when it moves; accrual records it when it is earned or owed. Example: with accrual, a sale counts when you deliver, even if the customer pays next month. Accrual gives a truer picture of how the business is doing; cash is simpler. Knowing which your books use changes how you read them. 2. Accounts Receivable and Accounts Payable Receivables are money owed to you; payables are money you owe. Example: an unpaid invoice is a receivable; a bill you have not paid is a payable. Watching both tells you whether cash is about to get tight or loose. 3. Cost of Goods Sold COGS is the direct cost of producing what you sell. Example: for a product company, it is materials and production; for a service, it is the direct labor to deliver. Revenue minus COGS is your gross profit, the foundation of whether the business works. 4. Reconciliation Reconciliation is matching your books to your bank and card statements to confirm they agree. Example: if your books say you have one balance and the bank says another, reconciliation finds the difference. It is the routine that keeps your numbers trustworthy. 5. Chart of Accounts The chart of accounts is the organized list of categories your transactions are sorted into. Example: rent, payroll, and software each have a place. A clean chart makes your reports readable; a messy one makes them noise. 6. Burn Rate and Runway Burn rate is how fast you spend cash; runway is how many months that leaves before you run out. Example: spending fifty thousand a month with three hundred thousand in the bank is six months of runway. These two numbers tell you how much time you have. Going Deeper Understanding these terms makes you a better partner to whoever keeps your books, and a sharper decision-maker. When you are ready for help, you can compare bookkeepers and accountants, with their specialties and verified reviews, on Sam's List . Confirm credentials and fit before engaging. Frequently Asked Questions What's the...
