FINANCE, IN PLAIN ENGLISH
Eight everyday finance terms, with definitions and simple examples. Use this glossary to understand the records, workflows and reports discussed across Nakitte.
Accounts receivable is money customers owe a business for goods or services already supplied on credit. Customer invoices commonly document these amounts. A receivable remains outstanding until it is settled or otherwise removed from the records; it is not cash already received.
Example A customer owes $1,200 for completed work, payable in 30 days. The unpaid amount is an account receivable.
Accounts payable is money a business owes suppliers for goods or services purchased on credit. Supplier bills commonly document these obligations and their due dates. Recording a payable recognizes an amount owed; recording its payment reduces that liability.
Example A supplier delivers $600 of office supplies and invoices the business for payment next month. The amount is accounts payable.
Cash flow forecasting estimates future cash receipts, payments and balances over a chosen period. A forecast combines the starting cash balance with assumptions about when money will arrive and leave. It supports planning; actual cash flows may differ as dates, amounts or assumptions change.
Example Starting cash of $10,000, expected receipts of $4,000 and expected payments of $6,000 produce a forecast closing balance of $8,000.
Bank reconciliation compares a business’s cash records with its bank statement. It identifies timing differences, bank fees and missing or incorrect entries, then explains or resolves the differences. Reconciliation checks recorded activity; the process itself does not initiate bank transfers.
Example A $20 bank fee appears on the statement but is missing from the books. Recording it helps reconcile the balances.
Recurring billing is the process of creating invoices or charges on an agreed schedule for an ongoing service or arrangement. The schedule may be monthly, quarterly or annual. Generating an invoice establishes a request for payment; collecting the money is a separate step.
Example A consultancy issues a $500 invoice on the first day of each month for an ongoing support agreement.
The general ledger organizes posted accounting entries by account, such as cash, receivables, payables, income and expenses. It provides the balances used for financial reports. In double-entry bookkeeping, each transaction has debit and credit entries whose total amounts are equal.
Example Collecting a $1,200 customer receivable increases the cash account and reduces accounts receivable by the same amount.
A trial balance lists general ledger account balances at a specific date, with debit and credit totals. Equal totals help check the arithmetic of double-entry records. A balanced trial balance can still contain errors, including omitted transactions or entries posted to the wrong accounts.
Example An expense posted to the wrong expense account can leave total debits and credits equal while the classification remains incorrect.
Cash flow measures money received and paid during a period. Profit measures recognized income less the related expenses. Under accrual accounting, recognition can occur before or after payment, so a profitable business can still have limited cash available to meet upcoming obligations.
Example A completed project earns $5,000, but the customer pays next month. Recognizing that income does not put cash in the bank today.
These examples explain general finance terminology. For Nakitte’s available workflows and current scope, see the product overview and FAQs.
