Terms
The words used on the path, with the Xero screen and the QuickBooks name where they differ.
Accounts payable (AP)
What you owe suppliers.
A current-liability control account. Its balance must equal the Aged Payables (open bills minus credits). Increased by entering bills; decreased by paying or allocating credit notes.
Xero · Purchases → Bills. US files typically use a 2xxx current-liability code (Cedar uses 2000). Older UK/NZ templates often used 800 — don’t copy that onto a US chart.
QuickBooks · Expenses → Bills. Detail type Accounts payable (A/P) is reserved.
Accounts receivable (AR)
What customers owe you.
A current-asset control account. Must equal Aged Receivables. Increased by invoices; decreased by receipts, credit notes, and write-offs done through the subledger.
Xero · Sales → Invoices. Find & Match on reconcile to clear.
QuickBooks · Sales → Invoices, then Receive payment or match from Banking.
Accrual basis
Record when earned or incurred.
Revenue when the work is done; expenses when the cost is used — not when cash moves. Xero and QBO default reports are accrual, with a cash toggle.
Accrued income / accrued receivables
Work earned, not yet billed — a current asset, not AR.
Debit Accrued income, credit revenue. Do not debit the AR control account: there is no invoice yet, so aging would not match the ledger. When you invoice, debit AR and credit Accrued income (or reverse the accrual and raise the invoice). AccountingCoach uses Accrued Receivables for the same asset.
Xero · A Current Asset on the chart (Cedar 1150). Not 1100 Accounts receivable.
QuickBooks · Other Current Assets (unbilled / accrued receivables).
Accumulated depreciation
Contra-asset holding wear-and-tear to date.
Credit-normal. Shown against the related fixed asset so net book value = cost − accum. dep. The period’s charge lives on the P&L as Depreciation expense.
Xero · Set as the accum. dep. account on each Fixed asset register item.
Aged receivables / payables
Open invoices or bills bucketed by due date.
The subledger behind AR/AP. 30/60/90+ buckets drive collection and payment. If aging ≠ control account, a journal went through the control or a document is missing.
Xero · Reporting → Aged Receivables / Aged Payables.
QuickBooks · Reports → Accounts receivable/payable aging summary.
Avalara
Sales-tax engine commonly paired with Xero US.
QBO has a native Sales Tax Center. Xero US typically calculates multi-jurisdiction sales tax via Avalara. Single-state simple rates can be maintained as tax rates plus a payable account — with care.
Bank rule
If the feed looks like this, code it like that.
Conditions on payee/amount/reference → contact, account, tax, tracking. Tight conditions. Review the first hits. A bad rule replicates faster than a junior.
Xero · Accounting → Bank accounts → Bank rules. JAX (Growing+) is the AI cousin, still a first pass.
QuickBooks · Banking → Rules.
Bill
A supplier invoice you need to pay.
Posts debit expense/asset, credit AP. Pay later by matching the bank line. Not the same as spend-money/expense, which credits the bank immediately.
Xero · Purchases → Bills. Smart Document Capture or Hubdoc can draft them.
QuickBooks · Expenses → Bills (Essentials and above).
Cash basis
Record when money moves.
Useful for some US tax filings. Dangerous as the only bookkeeping habit: no AR, no AP, no way to produce accrual later. Keep invoices and bills even if you report cash. Cash basis does not let you expense capital equipment — still capitalize, then depreciate, unless the CPA elects §179 or bonus on the return. Small-business taxpayers under the IRC §448(c) test may use cash even with inventory (§471(c)).
Chart of accounts
The numbered list of ledger buckets.
Code, name, type, tax default. Type drives the financial statements. Xero charts are flat (no subaccounts); QBO allows nesting. Keep it lean; slice with tracking/classes.
Xero · Accounting → Chart of accounts.
QuickBooks · Settings → Chart of accounts.
Clearing account
A holding asset or liability that should return to zero.
Merchant clearing, payroll clearing, undeposited funds. Leftover balances are unmatched items, not profit. Reconcile them like a bank.
Control account
A GL account that must equal a subledger.
AR, AP, and often inventory, payroll liabilities, and fixed assets. Never manual-journal through them to “tidy” — use the document (invoice, bill, credit note, register).
Conversion balances
The opening trial balance when a Xero file goes live.
Must include open invoices and bills so AR/AP equal their aging on day one. Don’t also journal the same totals.
Xero · Accounting → Conversion balances.
QuickBooks · Opening Balance Equity is the plug — allocate it before the first close.
Credit
The right side of a journal.
Increases liabilities, equity, and revenue; decreases assets and expenses. Not a synonym for “money in.”
Credit note / credit memo
Reverses (part of) an invoice or bill.
Receivable credit note: credit AR, debit revenue/tax. Allocate it to the original invoice. Don’t delete history.
Xero · Credit note.
QuickBooks · Credit memo (customer) or vendor credit (supplier).
Debit
The left side of a journal.
Increases assets, expenses, and drawings; decreases liabilities, equity, and revenue. Not a synonym for “money out.”
Deferred revenue
Cash in for work not yet done — a liability.
Debit bank, credit deferred revenue. Release to income as you perform. Maintenance plans sold upfront live here. The mirror of accrued income: cash first, work later.
Depreciation
Spreading a fixed asset’s cost over useful life.
Books often straight-line. Tax may use Section 179 or bonus — a book-to-tax difference, not a reason to recode the asset to expense in the ledger.
Xero · Accounting → Fixed assets can post the run.
Direct costs
Xero’s name for cost of sales.
Costs that belong next to revenue so gross margin means something: job materials, install subcontractors. Rent for the shed is overhead.
QuickBooks · Cost of goods sold.
Double-entry
Every posting has equal debits and credits.
Xero and QBO are double-entry even when you never type a journal. An invoice is already a journal.
Drawings
Owner taking equity out. Not an expense.
Debit drawings (or distributions), credit bank. Payroll is for employees — including S-corp owners who need a reasonable wage.
Find & Match
Xero’s tool to pair a statement line with existing invoices or bills.
Use it instead of creating a new spend/receive when the document already exists. Prevents double-counting and keeps control accounts clean.
QuickBooks · Match on the banking page, or Receive payment / Pay bills.
Fixed asset
A resource that will last beyond a year and is over your cap threshold.
Mowers, vans, computers above the de minimis. Capitalize, then depreciate. Below threshold, expense.
Xero · Accounting → Fixed assets.
General ledger
Every account, every posting.
The books. Journals, invoices, bills, and bank recs all land here. Reports read it.
GST / VAT
Goods and services / value-added tax — usually recoverable on purchases.
Output tax on sales, input tax on purchases, net paid to the tax office. Do not treat US sales tax on purchases as input GST.
Gusto
US payroll engine behind Xero Payroll.
Calculates, files, and typically posts summary journals to Xero. Match later tax draws to payroll liabilities, not to wages again.
QuickBooks · QuickBooks Payroll is the native analogue (paid add-on).
Hubdoc / Smart Document Capture
Xero document extraction — photo or PDF to a draft bill.
As of 2026, Smart Document Capture is native on Xero business plans (JAX extracts contact, date, amount, lines). Hubdoc remains a publisher for some firms. A draft is not posted until you approve. Month-end: empty the draft queue for the period.
QuickBooks · Receipts capture, or Dext and similar.
Invoice
A sales document that posts AR and revenue.
Approve to post. Quotes do not post. Matching the payment clears AR; coding the payment to income double-counts.
Xero · Sales → Invoices. Repeating invoices for retainers.
JAX
Xero’s 2026 AI layer for bank rec (Growing+).
Proposes or auto-reconciles from history. Still a first pass. Exceptions, new payees, and fraud stay human.
QuickBooks · AI categorization on the banking page.
Journal
A dated, narrated, balanced set of debit and credit lines.
Manual journals are for depreciation, accruals, openings, and corrections. Do not use them to pay invoices or bills.
Xero · Accounting → Manual journals. Can repeat or reverse.
QuickBooks · + New → Journal entry.
Lock date
The last date users may post into.
Without it, a “closed” March can still move on April 20. Advisors may have a later lock than other users.
Xero · Financial settings → Lock dates.
QuickBooks · Advanced settings → Close the books.
Matching principle
Put cost in the same period as the income it helped earn.
The reason accruals, prepayments, and depreciation exist.
Prepayment / prepaid
Paid now, benefit later — an asset.
Debit prepaid, credit bank. Consume monthly to expense. Xero has a Prepayment account type.
Profit and Loss (P&L)
The income statement — revenue minus costs for a period.
Not a snapshot of what the business owns. Xero: Reporting → Profit and Loss (accrual by default, cash toggle). QBO: Reports → Profit and Loss. Gross profit is revenue minus direct costs; net profit is after overhead.
Xero · Reporting → Profit and Loss.
QuickBooks · Reports → Profit and Loss.
QuickBooks Online (QBO)
Intuit’s cloud ledger. Same double-entry job as Xero; different screens.
Invoice, bill, receive payment, expense, journal entry, class/location, Close the books. Simple Start does not have bills. Native US sales-tax center and 1099 tools are stronger than Xero US.
Reconciliation
Proving the ledger agrees to an independent record.
Banks and cards against statements; AR against aging; clearing against zero. Xero recs statement lines continuously; QBO also has a period-end ending-balance rec.
Xero · Accounting → Bank accounts → Reconcile, then the Bank Reconciliation report.
QuickBooks · Banking For Review, then Reconcile to $0.00 difference.
Retained earnings
Prior-year profits left in the business.
QBO rolls net income into Retained Earnings at year-end automatically. Xero shows Current Year Earnings as a calculated Balance Sheet line (this year’s P&L). You journal only if you need to split it into named equity accounts.
Sales tax
US tax collected on taxable sales; a liability, not income.
Credit sales tax payable on the invoice; debit it when you file. Purchase-side US sales tax is usually part of cost, not a recoverable credit. Connecticut 2026: general 6.35% statewide (no local add-on); meals 7.35%; certain luxury 7.75%. Landscaping services are taxable.
Spend money / receive money
Cash posting with no invoice or bill.
Debit expense, credit bank (spend); debit bank, credit income or a balance-sheet account (receive). Don’t use when an invoice or bill already exists.
QuickBooks · Expense, check, bank deposit, sales receipt.
Suspense
A temporary parking account.
Allowed while you wait on a receipt. Not allowed at lock date. Same for QBO’s Ask my accountant.
T-account
One ledger account drawn as a T: debits left, credits right.
A thinking tool. Software shows registers and reports instead.
Tracking category
Xero’s line-level tag for region, service line, etc.
Two categories can be active at once (four total, including archived). Keep the chart flat; let tracking slice reports. About 100 options per category is the practical cap.
QuickBooks · Classes and locations. Classes are often plan-gated (Plus/Advanced).
Trial balance
Every account’s debit or credit balance; columns equal.
Proves the ledger is in balance, not that coding is right. The source of the P&L and Balance Sheet.
Undeposited funds
QBO holding account for receipts not yet in a bank deposit.
Use it when you batch deposits (Stripe, a day’s checks). Xero more often matches the payout or uses a named clearing account.
W-9 / 1099-NEC
US contractor documentation and year-end form.
Collect a W-9 before paying. For payments in 2026, the federal 1099-NEC / 1099-MISC threshold is $2,000 (was $600 through 2025; indexes beginning 2027). Confirm each January; some states still use $600. QBO has strong native tools; Xero US includes W-9 + 1099 management on current plans, and Gusto can cover contractors.