Common Accounting Terms For Restaurants

Accounts Payable (A/P)
– Accounts payable refers to the total amount a company or business owes to its creditors and is usually associated with a short-term agreement. In other words, this amount is a business’ commitment to pay their debts at a designated time in exchange for the consumable goods and services they received from the suppliers.

In addition, the sum of these outstanding bills is then kept and recorded on a company’s balance sheet as a current liability. A company may fall into default if it fails to keep up on the payment terms earlier stipulated by the business supplier or creditor.

Accounts Receivable (A/R)
– Accounts receivable refers to the money balance that is yet to be paid off by customers for the products provided and services rendered by a company/business. These amounts are typically created when companies grants their clients varied goods or services even on credit.

While accounts payable may sound closely similar to this common business term, it solely represents the money owed to a company instead of the other way around. Furthermore, this particular amount balance is listed as a current asset on a company’s balance sheet, essentially giving them a legal authority to collect debt from customers within agreed payment terms.

Accrual Basis Accounting
– Accrual basis accounting is one of two accounting methods generally done by a company or business. This method refers to when a company records revenue or expenses anytime a transaction is made, regardless of when payment is received.

This accounting practice recognizes any economic income at the same period of sale despite the complete lack of cash exchange. In simpler words, with this method, a business may be invoicing a customer and reports this as revenue, while associated cash transactions has yet to occur during this time.

Asset
– An asset describes any economic resource that a company owns and/or controls. With the expectation to provide future benefit, it is used at a company’s discretion to reduce expenses, increase economic value or aid in a business’ operations.

Balance Sheet
– A company’s balance sheet reveals all its notable business records about its current progress and operation. This means it keeps track of all the firm’s assets, the money they own and owe, liabilities that are yet to be taken care of and the owners’/shareholders’ equity (net worth). It must also be noted that a balance sheet provides a snapshot of a company’s financial position at a given point in time.

Bottom Line
– The bottom line describes a how much a business has earned and/or lost over a certain period of time. This may indicate their earnings, profit, or net income, represented by its relative location at the bottom of a company’s income statement. Business managements can improve their bottom line by either increasing revenues or reducing expenses.

Balance Sheet
– A company’s balance sheet reveals all its notable business records about its current progress and operation. This means it keeps track of all the firm’s assets, the money they own and owe, liabilities that are yet to be taken care of and the owners’/shareholders’ equity (net worth). It must also be noted that a balance sheet provides a snapshot of a company’s financial position at a given point in time.

Bottom Line
– The bottom line describes a how much a business has earned and/or lost over a certain period of time. This may indicate their earnings, profit, or net income, represented by its relative location at the bottom of a company’s income statement. Business managements can improve their bottom line by either increasing revenues or reducing expenses.

Cash Basis Accounting
– Cash basis accounting refers to the other major accounting method. Unlike accrual accounting, this practice records revenues and expenses at the same period that payment is made or received instead of doing so anytime they are incurred despite the lack of cash transactions.

It does not recognize any economic event until a completed exchange of values occurs. Although it is a simpler and less expensive accounting method in contrast with accrual basis accounting, it may also produce an inaccurate record of business growth in the short term.

Cash Flow
– Cash flow reveals the difference between reported financial statements and cash transactions that actually occur.
It shows the amount of cash and cash-equivalent that is made and spent by a company.

This indicates all cash generated by different business activities and a company’s expenses relating to capital assets and investments as well.

Debt
– Debt is the amount of money one party owes from another. This could refer to a loan, a line of credit or even the money you borrowed from your mother. Debt is used by businesses as a way of making important purchases that they can not afford on their own. It can then be paid back within a given period of time, usually with interest.

Depreciation
– Depreciation is an important part of accounting since it allocates the cost and benefit of a company’s asset over its time of use or life expectancy. It indicates how much of an asset’s value has been used up over the time that has passed since its purchase.

Depreciating assets can be tricky and can greatly affect profits, it is important to make sure your methods are precise and done correctly.

Expenses
– Expenses refer to the costs a company incurs to operate and generate revenue effectively. These business expenses may include employee wages, factory rents, equipment replacements, payment to suppliers and other marketing costs. Working hard to boost profits while still keeping expenses in check is very important when handling a business.

Journal Entry
– A journal entry records all business transactions done and made by a company. It reports the date of a transaction, the amounts, vendor information and other important purchase details worth noting. Journal entries are kept for future business reference and for transferring to other accounting records such as the general ledger.

QuickBooks is designed to efficiently aid in the important task of keeping a detailed and useful business journal. It lets you enter the bill, the information of suppliers, the amounts used, and other notes about the transaction in the simplest way just for you. It also lets you make these records and gets most things done efficiently without having to input separate entries. It will sure to be the most helpful when making and keeping accurate financial statements for the business.

House Account
– This refers to the informal term for an account’s receivable account. Accounts receivable(A/R) is the total amount a company is owed by it customers. A quick example of A/R is when a customer may receive a company’s goods and services with a promise to pay later on.

A house account can also lend credit to clients and allow them to pay much later after the goods and services are delivered. Although house accounts are commonly present in the hotel/resort business industry, refraining from this practice as much as possible is the good advice you might need to keep in mind.

Liability
– For a quick note, a liability is something a company owes and have the obligation to pay off, usually a sum of money. These include loans, mortgages and warranties that must be settled within payment terms.

It may also refer to sales tax a business owner owes the government or even payroll taxes you owe the state. Liabilities can be settled fairly through transfer of money or exchanges of goods and services.

Net Income
– Net income calculates and summarizes a company’s earnings or profit by counting in all the sales made from the goods and services they delivered. By deducting out the cost of creating and selling the goods, taxes and perhaps each and every other expenses you made for it – it gives you your net income result!

Additionally, it is an important number to record in order to assess how much revenue there is in relation to the expenses of a business.

Point of Sale (POS)
– A point of sale (POS) system is a combined software and hardware system used to manage retail operations and payment for goods and services. It is typically placed both customer facing and back-office facing for a swift transaction.

It helps make payment transactions and the fulfillment of customer orders easier and quicker as well. It can also process credit card payments and serve as a virtual business sales point.

Profit and Loss
– Also referred to as a profit and loss statement, it is a financial statement that summarizes the revenues and expenses incurred by a business to showcase its profitability over a period of time.

These records may be used to provide knowledge on how a company can improve profit earnings, cut down on regular business expenses, or both.

Retained Earnings

– Retained earnings describe the amount of net earnings left over for the business after owner/partner payment distribution. Hence, the term “retained” earnings.

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