Reporting Glossary
Plain-English definitions of 14 key financial reporting terms — from P&L, Balance Sheet, and Cash Flow Statement to gross margin, working capital, accrual basis, and YTD.
Accounts Receivable Aging Report
A report that groups outstanding customer invoices by how long they've been unpaid, 0 to 30 days, 31 to 60 days, etc. Used to identify overdue accounts and prioritize collections.
Accounts Payable Aging Report
A report that groups outstanding supplier bills by how long they've been unpaid. Used to track upcoming payment obligations and avoid late fees.
Accrual Basis
A reporting method where revenue is recorded when earned and expenses when incurred, regardless of when cash moves. Gives a more accurate picture of profitability in each period. Required for most corporations and businesses with inventory.
Balance Sheet
A financial statement showing what the business owns (assets), owes (liabilities), and the owners' stake (equity) at a specific point in time. The accounting equation always holds: Assets = Liabilities + Equity.
Cash Basis
A reporting method where revenue is recorded when cash is received and expenses when cash is paid. Simpler, but can give a misleading picture when receivables or payables are significant.
Cash Flow Statement
A financial statement showing the movement of cash in and out of the business during a period, broken into operating activities (core business), investing activities (asset purchases/sales), and financing activities (loans, owner contributions/distributions).
Comparative Report
A report that shows two or more periods side by side, for example, this year vs. last year, or month by month across the year. Useful for spotting trends.
Gross Margin (Gross Profit Margin)
Gross profit divided by Revenue, expressed as a percentage. Measures how efficiently the business delivers its core product or service. Higher is generally better; compare to industry benchmarks.
Net Income
The "bottom line," revenue minus all expenses. Positive net income = profit. Negative net income = loss for the period.
Net Margin
Net income divided by Revenue, expressed as a percentage. Tells you how much of each dollar of revenue the business keeps after all costs. A key indicator of overall business efficiency.
Profit & Loss Statement (P&L)
Also called an Income Statement. Shows revenue, expenses, and net income or loss over a period of time. The most commonly reviewed financial report for day-to-day business decisions.
Retained Earnings
Cumulative profit that hasn't been distributed to owners. Appears on the Balance Sheet under equity. Grows each year the business is profitable; shrinks with losses or distributions.
Working Capital
Current Assets minus Current Liabilities. Measures whether the business has enough short-term assets to cover short-term obligations. Positive working capital = the business can meet its near-term obligations. Negative working capital = potential cash flow problem.
Year-to-Date (YTD)
From the beginning of the current fiscal year to the present date. Common reporting period, a YTD P&L shows all income and expenses since the start of the year.