Quick answer

Bookkeeping is recording: logging every deposit, expense and invoice accurately and keeping the paperwork behind each one. Accounting is interpreting: turning those records into reports, tax positions and decisions. A freelancer needs the first every week and the second occasionally. The IRS's Publication 583 starts on the recording side, saying that opening a business checking account is one of the first things to do when starting a business. The glossary below defines the terms a freelancer is likely to meet, beginning with the two that matter most. ZenBusiness handles the entity and EIN that come before the books, and its ZenBusiness accounting page explains accounting basics for new owners.

What is the difference between bookkeeping and accounting?

Bookkeeping is the day-to-day work of recording financial activity. A client pays an invoice, a software subscription renews, a laptop is bought: each event gets logged with a date, an amount, a category and a supporting document. The output is an accurate, complete set of records.

Accounting sits on top of that record. It covers summarizing the numbers into reports, working out what is owed in tax, spotting trends and advising on choices such as pricing or equipment purchases. The output is understanding and decisions.

The line is blurry for a one-person business. A freelancer who categorizes expenses and later reviews which clients are most profitable is doing both. The distinction still matters because the skills, cost and frequency differ. The entries below are grouped loosely, with recording terms first.

Which terms describe the recording side?

Bookkeeping. The recording of transactions and the storage of the documents behind them. It is the foundation for everything else.

Accounting. The interpretation of recorded transactions into reports, tax calculations and decisions.

Transaction. Any single financial event: a deposit, a payment, an invoice sent, a purchase made.

Invoice. A bill sent to a client. The IRS lists invoices among the supporting documents for gross receipts, purchases and inventory, expenses and assets.

Receipt. Proof of a purchase. Receipts support expense entries, and the IRS names related items such as cash register tapes and credit card sales slips.

Categorizing. Assigning each transaction a type, such as software, travel or equipment. Publication 583 tells owners to indicate the source of deposits and the type of expense in the checkbook, which is categorizing in its simplest form.

Reconciliation. Comparing the books with the bank or card statement to confirm they agree. The IRS lists account statements among the supporting documents for expenses, which is what makes this check possible.

Which terms describe money and accounts?

Business checking account. A bank account used for the business only. Publication 583 says one of the first things to do when starting a business is to open one, and to keep it separate from a personal checking account.

Business checkbook. The IRS calls it the basic source of information for recording business expenses, which is why the source of each deposit and the type of each expense should be noted there.

Gross receipts. Money the business takes in. The IRS names the documents that support it: cash register tapes, bank deposit slips, receipt books, invoices and credit card charge slips.

Expenses. Money the business spends. The IRS names canceled checks, cash register tapes, account statements, credit card sales slips and invoices as supporting documents.

Assets. Items of lasting value the business owns, such as equipment. The IRS names purchase and sales invoices, real estate closing statements and canceled checks as the supporting documents.

Purchases and inventory. Goods bought for resale or use. The IRS lists canceled checks, cash register tape receipts, credit card sales slips and invoices.

Supporting documents. The paperwork that proves a recorded entry. The four categories above are the IRS's own groupings.

Which terms describe how long to keep records?

Retention period. How long a record must be kept. The IRS page on how long to keep records gives 3 years as the general period.

The 6-year period. Applies when income that should have been reported was not, and the omitted amount is more than 25% of the gross income shown on the return.

Indefinite retention. Applies if no return is filed, or if a fraudulent return is filed.

The 7-year period. The IRS lists 7 years for a claim for a loss from worthless securities or a bad debt deduction. A bad debt, in plain terms, is money owed that will not be collected. Which debts qualify for a deduction is not covered here.

Employment tax records. Records of tax tied to employees. The IRS says to keep them at least 4 years after the date the tax becomes due or is paid, whichever is later.

Audit. A formal review of records by a tax agency. How audits work is not covered here, though one rule below ties retention to them.

Which terms apply only if someone is hired or sales tax applies?

Payroll records. Records of what employees are paid. The US Department of Labor's Fact Sheet 21 says each employer must preserve them for at least three years under the Fair Labor Standards Act (FLSA).

FLSA. The Fair Labor Standards Act, the federal law whose recordkeeping rules the Department of Labor describes in Fact Sheet 21.

Supporting payroll records. Time cards, piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages. The same fact sheet sets 2 years for these.

Sales and use tax. A state-level tax. In California, the CDTFA's Publication 116 says the records must be kept at least 4 years, and longer during an audit, when all records covering the audit period should be retained until the audit is complete. Other states' rules are not covered here.

A freelancer with no employees and no taxable sales can skip these entries until the situation changes.

Which terms describe the business itself?

Entity. The legal form of the business, such as a sole proprietorship or an LLC. The choice affects how the business is set up, and it is not covered in depth here.

EIN. The employer identification number, a tax ID for the business. The IRS sets out how to apply in its instructions for Form SS-4, which is not covered here.

Registered agent. The person or company designated to receive legal and official documents for a business entity.

Sole proprietor. A person who runs a business without forming a separate entity. A freelancer is often one by default.

Single-member LLC. A limited liability company with one owner. Its tax treatment is not covered on this page.

Where does ZenBusiness fit?

ZenBusiness sits upstream of the books. It forms the entity and handles items such as the EIN and registered agent, which come before a business account can be opened in the business's name. It also offers a free accounting consultation to customers who form an entity through it.

One point to state plainly: ZenBusiness shut down its banking service, so the business checking account that the IRS recommends has to be opened with a bank elsewhere. The IRS guidance applies whichever bank is used.

For a freelancer who feels overwhelmed and wants one provider for formation and bookkeeping support, that bundle is a practical convenience. For one who already has an entity and an account, it matters less.

Which options can handle the recording?

The options below are listed alphabetically. The order is not a ranking. Prices were checked on each provider's own pricing page on 2026-10-06 and may have changed since. Promotional rates are labeled separately from ongoing prices.

FreshBooks

As of 2026-10-06, ongoing prices are Lite at $23 per month, Plus at $43 per month and Premium at $70 per month. Select is quote-only. A promotional rate of $1 per month for one year applies to Lite, and it is not the ongoing price. Best for freelancers who want to do their own books and expect to move up a tier as client work grows.

QuickBooks Solopreneur

QuickBooks Solopreneur costs $20 per month at the time of writing. A promotional rate of $10 per month for 3 months is offered, and it is not the ongoing price. Best for freelancers who want a widely recognized name and are comfortable working in software. Those who later want human help may look at QuickBooks Experts, the current name for the service formerly called QuickBooks Live.

Wave

Wave's Starter plan is free. Pro is $19 per month or $190 per year, with a promotional $9.50 per month for 3 months that is not the ongoing price. Card processing is 2.9% + $0.60, the receipts add-on is $8 per month, and payroll starts from $25 per month, all as of 2026-10-06. Best for freelancers on a tight budget who will handle their own recording.

Xero

Xero's plans are Early at $27 per month, Growing at $59 per month and Established at $97 per month. A promotional offer of 80% off for 3 months exists, and it is not the ongoing price. Best for freelancers expecting the business to add complexity over time and wanting a platform that scales with it.

ZenBusiness Money Pro

ZenBusiness Money Pro is $30 per month, sold as an add-on alongside formation, according to ZenBusiness's own site. The published features are custom invoicing, revenue and expense tracking, and tax preparation tools. It is a service rather than accounting software, so a feature-by-feature comparison with the tools here would mislead, and any detail beyond those three features, including plan tiers, is not published. Best for freelancers who would rather hand off the recording than learn a tool, particularly those forming an LLC who want the entity work and the bookkeeping support from one company.

Zoho Books

Zoho Books has a Free plan at $0, limited to businesses under $50K in annual revenue. Paid tiers are Standard at $20 per month, Professional at $50 per month, Premium at $70 per month, Elite at $150 per month and Ultimate at $275 per month. Best for freelancers who want a free starting point with a long upgrade path, provided revenue stays under the free-plan limit.

What should a freelancer take from these terms?

The vocabulary reduces to a short routine. Keep a business account that is used for business only. Note the source of each deposit and the type of each expense. File the supporting documents the IRS names, and keep them for the longest period that could apply.

A freelancer comfortable with software can reach that routine with a free or low-cost tool, and that is a plain concession to the dedicated products. One who would rather not own the weekly work can consider a bundled service. Accounting comes after, once the records are reliable.

Sources

This is general information, not legal, tax or accounting advice, and requirements vary and change.