Cleanup guide
Bookkeeping Cleanup Glossary
The terms that come up when books are being cleaned up, in plain words.
The basics
Catch-up bookkeeping
Entering a period that was never recorded.
Cleanup bookkeeping
Correcting a period that was recorded badly.
Reconciliation
Checking the transactions in the books for an account against that account’s statement, until the ending balances agree.
Chart of accounts
The list of categories the books use for income, expenses, assets, debts and equity.
Profit and loss statement
Income less expenses for a period. Also called an income statement.
Balance sheet
What the business owns, what it owes, and the difference, on a given date.
Cash basis and accrual basis
Two ways of deciding when income and expenses count: when money changes hands, or when it is earned or owed. The books follow the method the tax returns have used.
Closing the books
Locking a finished period so its figures cannot be changed by accident.
Where the mess usually is
Commingling
Mixing personal and business money in the same accounts. See personal and business money mixed together.
Transfer
Money moved between two of your own accounts. It is neither income nor expense.
Owner draw and distribution
Money an owner takes out that is not wages. It comes out of equity and is not an expense.
Owner contribution
Money an owner puts in. It is not income.
Opening balance equity
An account the software uses to make starting balances add up. It should be empty once the file is set up properly.
Undeposited funds
A holding account for payments received and not yet deposited. A large, old balance usually means income has been counted twice.
Suspense or uncategorized accounts
Catch-all accounts for transactions nobody has identified.
Receivables and payables
What customers owe you, and what you owe suppliers.
Principal and interest
The two parts of a loan payment. Principal repays the debt and is not an expense. Interest is.
Merchant cash advance
Financing repaid by regular withdrawals or a share of card sales. See loans and owner money.
Tax terms
Transcript
An IRS record of what was filed, assessed or reported for a taxpayer in a given year.
Substitute for return
A return the IRS prepares when none was filed, using income reported by third parties and none of your expenses.
Trust fund taxes
Tax withheld from employees’ pay and held for the government. See behind on payroll taxes.
Form 1099-NEC
The form a business files to report payments to contractors. See 1099s that were never issued.
Form 1099-K
The form a payment processor files to report the gross payments it handled for you.
Form W-9
The form a contractor gives you with their name and tax ID.
Basis
A running total of an owner’s investment in a business, or of what was paid for an asset. It affects whether distributions are taxed and whether losses can be used.
Depreciation
Deducting the cost of equipment, vehicles or property over time.
Amended return
A corrected version of a return already filed. See amended tax returns.
Extension
More time to file a return. It does not give more time to pay.
Nexus
Enough connection with a state for that state to require you to collect its sales tax.
Related situations and guides
The errors we find most often
Twenty-one errors that turn up in almost every cleanup, and what each does to the numbers.
Learn moreHow a cleanup works, step by step
The seven stages from first call to current books, and what each needs from you.
Learn moreWhat to gather, and how to get it
The full document list, ranked by how much each item helps, and how to replace what is lost.
Learn moreA QuickBooks file nobody trusts
Unreconciled accounts, duplicates, Undeposited Funds, bank-feed guesses. What gets repaired and in what order.
Learn moreCleanup Planner
Eight questions, then a plan: what comes first, what to gather, and which guides apply.
Part of Messy Books Help, alongside our catch-up bookkeeping service.
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