Home Glossary Accounting Terms for Bitcoin Users

Accounting Terms for Bitcoin Users

Last updated on May 02, 2026

Why this glossary exists

You know Bitcoin. Lightning, on-chain, sats, mempool, multisig. You're comfortable.

Accounting throws around terms you may not have learned: debits and credits, accruals, retained earnings, double-entry. They're not hard, but they're worth defining.

This glossary covers the core accounting terms in plain English, with a Bitcoin-user audience in mind.

For the inverse glossary (Bitcoin terms for accountants), see Bitcoin Terms for Accountants.

Accounts and ledgers

Account. A category in your books. Examples: "Cash on Hand," "Sales: Coffee," "Software Subscriptions." Every transaction you record affects at least two accounts.

Chart of Accounts (CoA). The master list of all accounts in your business. Like a folder structure for your money.

Ledger. The complete record of all transactions. The General Ledger is the report that shows every transaction in every account.

Journal. A chronological list of transactions. Less commonly viewed in modern software because the General Ledger replaces it for most uses.

Journal entry. One specific transaction recorded in your books. Has at least one debit line and one credit line that must equal each other.

Debits and credits

Debit. One of the two sides of a journal entry. By convention, debits go on the left.

Credit. The other side. Goes on the right.

A common confusion: in everyday language, "credit" sometimes means "money in" (a credit to your account). In accounting, credit is one specific direction defined by the account type, not always "money in."

The rules:

Account type Goes up with Goes down with
Asset Debit Credit
Liability Credit Debit
Equity Credit Debit
Income Credit Debit
Expense Debit Credit

So when a customer pays you in cash:

  • Your bank account (Asset) goes UP. Debit it.
  • Your Sales (Income) goes UP. Credit it.

Both debit and credit are equal. That's the double-entry rule.

In BitBooks Simple Mode, you don't see debits and credits; the system handles them. In Advanced Mode (Journal Entries), you write them yourself.

Double-entry bookkeeping

Double-entry bookkeeping. The 500-year-old standard accounting method. Every transaction has two sides (debit and credit). They must equal. This catches errors and produces self-checking books.

It's why every accounting tool (BitBooks included) does this.

Period and date concepts

Accounting period. The time window your reports cover. Common periods: monthly, quarterly, yearly.

Fiscal year. A 12-month accounting period that may or may not match the calendar year. Some businesses' fiscal year starts April 1, ends March 31.

Year-to-date (YTD). From January 1 (or the fiscal year's start) through today.

Period close (or month close, year close). The act of finalizing a period and locking it from further changes. See Period Close.

The two main reports

Profit and Loss (P&L). Also called Income Statement. Shows revenue and expenses for a period. Tells you whether you made money. See Profit & Loss Report.

Balance Sheet. Shows assets, liabilities, and equity at a single point in time. Tells you what you own and owe. See Balance Sheet.

Trial Balance. A health-check report. Lists all accounts with their balances; debits and credits should equal. See Trial Balance.

Cash Flow Statement. Shows actual cash movement (separate from accrual profit). Tells you whether you have cash. See Cash Flow Statement.

General Ledger. Every transaction in every account, the deepest detail. See General Ledger.

Account categories

Assets. Things you own. Cash, Bitcoin, equipment, accounts receivable.

Liabilities. Things you owe. Bills not yet paid, loans, credit card balances.

Equity. The owner's stake. Assets minus Liabilities. Includes original capital plus accumulated profits.

Income (Revenue). Money coming in from sales or services.

Expenses. Money going out for operations.

The fundamental equation: Assets = Liabilities + Equity. Always balances.

Special account types

Accounts Receivable (AR). Money customers owe you (you've delivered, they haven't paid). An asset.

Accounts Payable (AP). Money you owe vendors (you've received the bill, haven't paid yet). A liability.

Retained Earnings. Accumulated profit that's stayed in the business (not paid out as dividends). An equity account.

Owner's Capital (or Owner's Equity). Money the owners put into the business. An equity account.

Cost of Goods Sold (COGS) / Cost of Sales. The direct cost of producing what you sold. An expense, but separated on the P&L from operating expenses.

Operating Expenses. Day-to-day costs of running the business: rent, salaries, marketing.

Depreciation. The accounting recognition that long-term assets lose value over time. Recorded as a periodic expense.

Cash basis vs accrual

Cash basis. Revenue is recognized when cash arrives. Expenses when cash leaves. Simple.

Accrual basis. Revenue recognized when earned (regardless of when cash arrives). Expenses when incurred (regardless of when paid). More accurate but more complex.

BitBooks uses accrual basis (the standard for most business accounting). If you sold a product on credit, it's revenue today even though the customer pays next month.

Some flow terms

Booking or posting an entry. Recording it in your books. After posting, it's part of the official record.

Reconciling. Matching your books against an external source (bank statement, wallet provider) to verify they agree. See What is Bank Reconciliation?.

Closing the books. Finalizing a period (typically year-end). Resets P&L accounts to zero, rolls profit into Retained Earnings, prepares for the next period. See Period Close.

Reversing. Creating a counter-entry that cancels a previous entry. Used to fix Posted entries since they can't be edited or deleted directly.

Audit and trust

Audit trail. The history of who changed what, when, and how. BitBooks' Activity Log is the audit trail.

Immutable / locked / posted. A transaction that can't be changed without explicit reversal. Once you mark something Posted, you can't just edit it.

Adjusting entry. A journal entry made to correct or fine-tune the books, often at period-end.

Closing entry. A journal entry made at year-end to roll P&L into Retained Earnings and reset.

Tax-related

Capital gains. Profit on selling an investment for more than you paid. For Bitcoin, this is the gain when you sell at a higher price than your cost basis.

Cost basis. What you originally paid for an asset. Used to calculate gains and losses on sale.

Realized vs unrealized. Realized = the gain or loss is "locked in" because you sold. Unrealized = on paper only because you still own.

1099. A US tax form for reporting payments to non-employees (independent contractors). For US businesses, you'd issue 1099s to vendors at year-end.

FIFO / LIFO. First-In-First-Out / Last-In-First-Out. Methods for assigning cost basis when you sell some of a holding.

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