Chart of Accounts: It’s like the skeleton of your Financial Statements. If it’s not built right, it can’t do its job. It has five main parts: Assets, Liabilities, Equity, Income, and Expenses.

Balance Sheet refers to report of Assets, Liabilities, and Equity. The accounts are arranged in two sections, and the two sections must equal each other. It’s like owning a house. The house is the asset, the mortgage is the liability; any difference is equity. In business we call it Retained Earnings. You can think of it as a statement  of what you own, what you owe, and the difference.

Profit & Loss Statement refers to a report of income minus expenses . This is the report that shows whether you have a profit or a loss. This report gives you the Bottom Line (Profit or Loss).

An Income Statement is the same as Profit & Loss, P&L, Statement of Income and Expenses. Yes, it gets confusing sometimes.

Cash Basis Accounting refers to a reporting system that counts only the money you earned and got paid for during the year. It is a very common way of reporting for small businesses.

Accrual Basis Accounting is a system that reports the money you earned during the year, whether you got paid or not, and the expenses you incurred, whether you paid for them or not.

Accounts Receivable: What people or businesses owe your business.

Accounts Payable: What your business owes other people or businesses.

A Certified Public Accountant is an individual who has taken a prescribed course of studies and passed a rigorous exam, admitting them to the profession. They are licensed by the States and subject to various laws, regulations, and professional codes of ethics.