Accounting Terms — In Plain English
You shouldn't need an accounting degree to understand your finances. Here's every term you might encounter — explained the way a friend would explain it.
The Basics
These are the terms you'll see most often. Master these and you're already ahead of most salon owners.
Revenue (aka Income)
All the money your salon brings in — before you subtract any expenses. Services, tips, product sales, it all counts.
Salon example: You made $7,200 this month from haircuts, color, and tips. That's your revenue.
Expense
Any money you spend to run your business. Rent, supplies, insurance, education — if it's a business cost, it's an expense.
Salon example: Your $1,200 booth rent, $300 in color supplies, and $75 insurance premium are all expenses.
Profit
What's left after you subtract all your expenses from your revenue. This is the money you actually get to keep.
Salon example: $7,200 revenue − $1,575 expenses = $5,625 profit. That's your take-home before taxes.
Loss
When your expenses are higher than your revenue. You spent more than you made. It happens — especially in slow months or during a startup.
Salon example: In your first month, you earned $2,000 but spent $3,500 on setup costs. That's a $1,500 loss.
Gross Income
Your total revenue before any deductions or expenses are taken out. Think of it as the "top line" number.
Salon example: You earned $86,000 for the year total. That's your gross income.
Net Income
Your income after all expenses and deductions. This is what you actually owe taxes on. It's the "bottom line."
Salon example: $86,000 gross − $22,000 expenses = $64,000 net income. Taxes are calculated on this.
Deduction (aka Write-Off)
A business expense the IRS allows you to subtract from your income, lowering the amount you owe taxes on. More deductions = lower tax bill.
Salon example: Your shears, booth rent, continuing education — all deductible.
Self-Employment Tax
A 15.3% tax that covers Social Security and Medicare. When you're employed, your employer pays half. When you're self-employed, you pay the whole thing.
Salon example: On $64,000 net income, you'd owe roughly $9,792 in self-employment tax alone.
1099 Form
A tax form you receive from clients or platforms that paid you $600+ during the year. It reports your income to the IRS — whether you file it or not.
Salon example: If a salon pays you as an independent contractor, they send you a 1099-NEC.
Depreciation
Spreading the cost of an expensive item over several years instead of deducting it all at once. The IRS has rules about which items qualify.
Salon example: A $2,000 styling station might be depreciated over 5-7 years on your taxes.
Cash Flow
The movement of money in and out of your business over time. Positive cash flow means more money coming in than going out. Negative means the opposite.
Salon example: You earned $6,000 this month and spent $4,500. Your cash flow is +$1,500.
Profit & Loss Statement (P&L)
A report showing your revenue, expenses, and profit (or loss) over a specific time period. It's the single most important report for any small business.
Learn more: Read our full P&L guide →
Tax-Specific Terms
Terms you'll encounter when it's time to file your taxes or talk to your tax preparer.
Schedule C
The IRS form self-employed people use to report business income and expenses. If you're a sole proprietor (most salon owners), this is your main business tax form.
Salon example: Your P&L feeds directly into Schedule C. Salon Accounting makes this easy.
Quarterly Estimated Taxes
Tax payments you make four times a year instead of once. The IRS expects self-employed people to pay as they earn, not all at the end. Miss a payment and you'll owe penalties.
Deadlines: April 15, June 15, September 15, January 15
Tax Bracket
The rate at which your income is taxed. The U.S. uses progressive brackets — you don't pay the higher rate on all your income, only on the amount within each bracket.
Note: Your tax bracket is based on net income, not gross.
Standard Deduction
A flat amount the IRS lets you deduct from your personal income. Most people take this instead of itemizing. It's separate from your business deductions on Schedule C.
Good news: You get business deductions AND the standard deduction.
Mileage Deduction
You can deduct the cost of driving for business purposes. The IRS gives you a per-mile rate — just track your miles and multiply.
Salon example: Driving to a trade show, supply store, or client's home? Those miles are deductible.
Home Office Deduction
If you use part of your home exclusively for business, you can deduct a portion of your rent, utilities, and internet. The IRS has a simplified method that's easy to claim.
Salon example: If you do salon bookkeeping from a home office, that space may qualify.
EIN (Employer Identification Number)
A unique number the IRS assigns to your business — like a Social Security number for your salon. You need one if you form an LLC or hire employees.
Tip: You can apply for an EIN for free on the IRS website. It takes 5 minutes.
W-9 Form
A form you fill out to give a client or business your taxpayer ID number. They use it to report how much they paid you (via a 1099).
Salon example: A salon may ask you to fill out a W-9 before you start renting a booth.
Bookkeeping Terms
Traditional accounting loves these words. Here's what they mean — and why Salon Accounting means you don't have to worry about most of them.
Accounts Receivable (A/R)
Money that's owed to you but hasn't been paid yet. In most salon businesses, you collect payment immediately, so this isn't a big concern.
Good news: Most salon owners don't need to worry about A/R.
Accounts Payable (A/P)
Money you owe to someone else — like a supply distributor or your landlord. It's basically your list of upcoming bills.
Salon example: Your monthly booth rent payment is an accounts payable item.
Reconciliation
Comparing your records to your bank statement to make sure they match. If you connect your bank to Salon Accounting, this happens automatically.
With Salon Accounting: Bank auto-import handles reconciliation for you.
Chart of Accounts
A structured list of all the categories your business uses to organize income and expenses. Traditional accounting software makes you set this up. Salon Accounting doesn't.
With Salon Accounting: We handle categories automatically. No chart of accounts needed.
Fiscal Year
The 12-month period a business uses for accounting purposes. For most salon owners, this is just the calendar year — January 1 through December 31.
Keep it simple: Unless your accountant says otherwise, your fiscal year is the calendar year.
Ledger (aka General Ledger)
A complete record of all financial transactions in your business. Think of it as a master list of everything — every dollar in and every dollar out.
With Salon Accounting: Your transaction list IS your ledger. We keep it simple.
Journal Entry
A record of a single financial transaction with debits and credits. Traditional bookkeeping requires these for every transaction. Sound painful? It is.
With Salon Accounting: No journal entries. No debits and credits. Ever.
Sole Proprietor
A person who runs a business by themselves without forming a separate legal entity. Most booth-renting stylists are sole proprietors — it's the simplest business structure.
Salon example: If you rent a booth and haven't formed an LLC, you're a sole proprietor.
You Don't Need to Memorize Any of This
Salon Accounting was built so you don't have to think about debits, credits, ledgers, or journal entries. Just track your income, categorize your expenses, and let the software handle the rest.
Start Free Trial — No Jargon Required