Glossary of common accounting terms
Competant bookkeepers or accountants will demand that you know the lingo. They want you to shine, baby! Learn. Use this glossary as a guide to communicating with professional money managers. This glossary can be a great starting point for financial literacy, check this out.
Bling Lingo – Glossary Common Accounting Terms
ACCOUNTING EQUAL: The basic accounting equation is the basis of the balance sheet. It is:
Owners may own equity in the company. This is called a risk. This is known as a liability.
Owner’s Equity = Liabilities
ACCOUNTS Due to business activity, your assets, liabilities, equity, and equity may change. These transactions can be tracked by your accounting software. In order to add up the changes in assets, liabilities, owner’s equity, revenue, and expense on your Income Statement, you will need to have several accounts. There are many accounts that can be required depending on what information is needed to run your business.
ACCOUNTS PAID: Also known as A/P. These are the bills that your business owes the government and suppliers. An account payable will be created if you have ‘bought’ it, but have not yet paid (such as when your company purchases ‘on-account). These can be found under the liability section.
ACCOUNTS RECEVABLE are also known as A/R. If you sell something and the customer doesn’t pay, it creates an account receivable. This is money customers owe for services or products they have purchased from you, but have not yet paid. Accounts receivable can be found in the Current Assets section.
ACCRUAL BASE ACCOUNTING Sales and expenses are accounted for when they occur. This accounting method allows you to accurately account for all business activities. Even though Mrs. Fernwicky may pay you in two years, if you sell something today to her, you will record it today. The paint that you buy today is recorded, even though it is due for payment next month. Cash basis accounting records the sale when the cash arrives, and the expense when the check is sent. It’s difficult to have a complete picture about what’s going on in your company.