Accounting Terminology 101: An Introduction to Accounting Jargon
hen you're getting your feet wet with business accounting, there are a lot of terms that are tossed around that can be confusing if you're not sure what they mean.
Here's a quick primer to help get you started.
Accounts Receivable: Money that is owed to you by your customers.
Accounts Payable: Money that you owe to outside vendors and expenses.
Assets: Everything that your business owns. Though it's typically physical assets, there are also intangible assets such as stock and intellectual property.
Balance Sheet: A financial document that shows your company's assets, liabilities and equity in one place.
Capital: The amount of money your business has available to invest or spend.
Depreciation: The decrease in an asset's value over time or use, such as a vehicle losing value over time or mileage.
Dividends: Company earnings that are distributed to the company's owners or shareholders.
Equity: The amount of money invested into the company by the owners, which may also be referred to as owner's equity.
Expenses: Costs related to doing business. Typically broken into consistent fixed expenses, variable expenses tied to production and operational expenses necessary to do business.
Financial Year: The time period the company uses for accounting purposes. It may line up with the calendar year, but could also use other start and end dates, such as July to June or October to September.
Ledgers: Also called accounts, this refers to where bookkeeping records are kept. The general ledger records the company's complete accounting history over the business' lifespan.
Liabilities: Debts that are owed by the company, whether one-time, short-term or long-term debts.
Profit and Loss Statement: A financial statement that includes the business' earnings, expenses and net profits over a particular period of time such as a month or year.
Revenue: All the money the company collects for its goods and services prior to removing any expenses, but can include credits for returns.
By having a grasp of these basic accounting terms, you can better understand the business accounting process. However, understanding these terms doesn't mean you need to do all your business accounting on your own. If you'd like help getting your business accounts in order, please feel free to contact us today. At AccountRely, when you work with us, you're part of the family.