As with most professions, bookkeeping comes with its own unique set of lingo and definitions. We put a quick small business bookkeeping glossary made up of some of the most popular terms you’ll need to know as a private practice owner:

• Accounts Payable: money that is owed from your business to your vendors for various expenses
• Accounts Receivable: money that is owed to your business from any of your clients or insurance companies
• Assets: all items of value owned by your business including cash in the bank or equipment
• Balance Sheet: a financial document that lists all assets, liabilities, and equity of the business at one moment in time
• Bookkeeping: the process of recording all incoming and outgoing transactions made by your private practice in an organized and accurate manner
• Budget: a projection or estimate of your revenue or expenses during a certain period of time
• Cost of Services (COS): the direct costs related to the service you provide in your private practice. They can be costs from the vendor the product is purchased from (for example, kinetic sand from Target purchased to use during a therapy session) or labor costs incurred to provide your therapy sessions (subcontractor fees or wages for a clinician you’ve hired)
• General Ledger: a complete record of all financial transactions conducted by your private practice
• Gross Profit: the profit earned after deducting the Cost of Services. Gross profit = Revenue – Cost of Services
• Income Statement: A financial statement that includes all revenue earned, cost of goods services, expenses, and net profit or loss. This is also called a profit & loss report or P&L.
• Net Profit: the amount of profit left once all expenses are deducted
• Profit & Loss Statement (P&L): A financial statement that includes all revenue earned, cost of services, expenses, and net profit or loss. This is also called an income statement.
• Profit Margin: the amount increased above cost in order to make a profit
• Return on Investment: the profit earned after expenses as compared to the amount invested
• Revenue: the income generated from your services. Usually shown as the top line item on the income (or profit and loss) statement from which all expenses and costs are subtracted to arrive at net income.

We hope this small business bookkeeping glossary is helpful for you and your private practice bookkeeping and finances!

Therapeutic Bookkeeping is a virtual accounting firm working exclusively with therapists all across the United States providing bookkeeping and accounting services!