Find definitions for common accounting terms used in QuickBooks Online.
There are a number of accounting terms used within QuickBooks Online. We define several of the most common ones for you.
Chart of Accounts account types are non-balance sheet accounts. This means they don't have their own register or account history.
Another category of income is Other Income, or income generated from the sale of a product or service that is not typical of your normal operations. Interest Income is an example of an Other Income account type.
If your company sells a product, your cost of goods sold (also called COGS, or cost of sales) expenses would be the material, labour, and other costs incurred to make and sell the product.
By contrast, your office expenses for rent or advertising are considered indirect, and should not be posted to the Cost of Goods Sold account type.
Liabilities include the bills you've received, money you owe on cards, sales tax you owe the government, employee withholdings you owe the government, and both short-term and long-term debts.
QuickBooks Online distinguishes between two types of liabilities:
Equity represents the difference between what you owe (liabilities) and what you have (assets). Your equity represents the health of your business, since it is the amount of money left after all of your debts are satisfied. If you sold all your assets today, and paid off your liabilities with the money received from the sale of your assets, the money left would be equity.
Equity comes from two sources:
This account type is used for Opening balance equity and Retained Earnings, which QuickBooks Online adds when you create a new company. It's also used for Owner's equity accounts (including capital investments and drawings). An owner can also take money out of the company. Such withdrawals, called owner's draws, reduce the company equity.
This account type tracks how much money you are owed by your customers, and requires a Customer with each entry.
This account type tracks how much money you owe your suppliers, and requires a supplier/supplier with each entry.