what are accounting terminologies

by Jairo Altenwerth Published 3 years ago Updated 2 years ago

Basic Accounting Terminologies

1. Capital (C) Capital is an investment made for profit by the businessman. ...
2. Liabilities (L) Liabilities are the amount to be paid to outsiders after a certain period of time. ...
3. Assets (A) ...
4. Sales ...
5. Purchase ...
6. Debtors/Account Receivable (AR) ...
7. Creditors/Account Payable (AP) ...
8. Stock/Inventory ...

More items

Full Answer

What are the basic accounting terms?

These professionals should consider learning the following terms:

Accrual basis accounting
Cash basis accounting
Accounts payable
Accounts receivable
Certified public accountant

What do you mean by the term accounting?

Definition of Accounting. Accounting can be defined as a process of reporting, recording, interpreting and summarising economic data. The introduction of accounting helps the decision-makers of a company to make effective choices, by providing information on the financial status of the business.

What are the basic functions of accounting?

identification,
recording,
classification and
summarization of transactions
ascertainment of results
exhibition of the financial position of an organization
communication of necessary information derived from an interpretation
analysis of the interested parties, including the management.

What is basic accounting?

What is included in basic accounting?

System of record-keeping. Companies must have a rational approach to record-keeping before they begin the accounting process. ...
Transactions. The accountant is responsible for generatinga number of business transactions, while others are forwarded to the accountant from other departments of a company.
Reporting. ...

What are the terminology of accounting?

Bookkeeping Terminology Accounts Payable – Outstanding payments the company currently owes to suppliers, vendors, and creditors — essentially any bills the company still has yet to pay. Accounts Receivable – Outstanding payments the company is currently owed by all customers or clients.

What are the 5 accounting terms?

Basic accounting terms, acronyms, abbreviations and concepts to rememberAccounts receivable (AR) ... Accounting (ACCG) ... Accounts payable (AP) ... Assets (fixed and current) (FA, CA) ... Asset classes. ... Balance sheet (BS) ... Capital (CAP) ... Cash flow (CF)More items...•

What are the 10 words that related in accounting?

Here are ten accounting term definitions to get you started to effectively communicate with your online accounting services provider.Assets. ... Balance sheet. ... General ledger. ... Gross margin. ... Loss. ... On credit/On account. ... Receipts. ... Revenue.More items...

What are the 7 basic accounting categories?

7 basic accounting conceptsRevenue. For a business, the total amount of money the company receives for selling services and products is its revenue. ... Expenses. Expenses are the costs a business incurs to generate revenue. ... Assets. ... Liabilities. ... Capital. ... Accounts. ... Financial statements.

What are the 3 basics of accounting?

Take a look at the three main rules of accounting: Debit the receiver and credit the giver. Debit what comes in and credit what goes out. Debit expenses and losses, credit income and gains.

What is basics of accounting?

Basic Accounting For Your Business: What You Need to Know Tracking income, expenses, assets, liabilities, and equity. Preparing financial statements. Developing a system for bookkeeping. Creating a payroll system. Figuring out tax regulations and payments.

What does () mean in accounting?

negative amountDefinition of Amounts in Parentheses A negative amount, such as a negative balance in your check register. A credit balance in an account that normally has a debit balance, or a debit balance in an account that normally has a credit balance. A credit entry, when a debit entry will not have parentheses.

What are golden rules of accounting?

What Are the Golden Rules of Accounting?Rule 1 - Debit the receiver, credit the giver.Rule 2 - Debit what comes in, credit what goes out.Rule 3 - Debit all expenses and losses and credit all incomes and gains.

What are basic terms?

Basic Term means the period commencing at the beginning of the day on the Delivery Date and ending at end of the day on the Expiration Date, or such earlier date on which the Lease shall be terminated as provided therein.

What are the 4 ledgers?

A ledger is also known as the principal book of accounts and it forms a permanent record of all business transactions.Sales Ledger or Debtors' Ledger. First among different types of ledgers is “Sales or Debtors' ledger”. ... Purchase Ledger or Creditors' Ledger. ... General Ledger.

What are 3 types of accounts?

3 Different types of accounts in accounting are Real, Personal and Nominal Account. Real account is then classified in two subcategories – Intangible real account, Tangible real account. Also, three different sub-types of Personal account are Natural, Representative and Artificial.

What are the 6 types of accounts?

Types of accountsAsset accounts are used to recognize assets. ... Liability accounts are used to recognize liabilities. ... Equity accounts are used to recognize ownership equity. ... Revenue accounts are used to recognize revenue. ... Expense accounts are used to recognize expenses. ... Gain accounts are used to recognize gains.More items...

What are the 4 types of accounting?

Discovering the 4 Types of AccountingCorporate Accounting. ... Public Accounting. ... Government Accounting. ... Forensic Accounting. ... Learn More at Ohio University.

What are the terms used in business?

Basic business terms to knowAccounting. This concept should be in every entrepreneur's arsenal of basic business terms. ... Accounts receivable. This is the amount of money your customers or clients owe your business for goods or services you supply. ... Accounts payable. ... Assets. ... Liabilities. ... Revenue. ... Expenses.

What are golden rules of accounting?

What are the different types of accounting?

Here are the nine most common types of accounting:Financial accounting. ... Managerial accounting. ... Cost accounting. ... Auditing. ... Tax accounting. ... Accounting information systems. ... Forensic accounting. ... Public accounting.More items...

What is accounting terminology?

Answer: Accounting terminology is the language of accounting. It’s a collection of terms that are speci... Read full

Why do you need accounting terminology?

Answer: Accounting terminologies are often the first thing that accounting students learn. Accounting terminology... Read full

What is an accounting term for money owed by a company or individual?

Answer: The accounting term for money owed by a company or individual is a liability.

How many accounting terminologies are there?

Answer: In total, there exist 42 terminologies in accounts. Some are more important and are used on an everyday basi... Read full

What is accounting terminology?

It is very hard to imagine business without accounting. Accounting terminology gives the complete description of the terms that are used and it is important to know the accounting terminology before delving into the subject .

What is accounting in business?

Accounting is everything about the process that helps to record, summarize, analyze, and report data that concerns financial transactions. Besides that, it also takes care of the profits and loss issues in business.

What is accrual basis?

In other words, Accrual basis records all the financial transfers when they occur, i.e. in the period in which they occur rather.

Why is it important to learn accounting terminology?

Besides that, the knowledge about common terminologies of accounting help to easily understand the accounting in detail . Some of them are as follows.

What is the difference between a debit and a credit balance?

It is of two types: first a debit balance and second a credit balance. When the sum of debit entries are more than the sum of credits than it is a debit balance and if the sum of debit entries is less than the sum of credits than it is a credit balance.

What is an asset in accounting?

Asset. It is a very important term in accounting terminology. It is a cash convertible property that one owns. For example, land, buildings, cash in bank accounts are all assets. There are broadly two types of assets – current asset and fixed asset.

What is double entry accounting?

Double-entry accounting records financial transactions in which each transaction is entered in two or more accounts. Furthermore, it involves two-way, self-balancing posting. Total debits must equal total credits. Which means for every entry there is an equal and opposing effect.

What are the basic accounting concepts?

The following list includes some key introductory accounting terms and core concepts for students to learn: 1 Assets 2 Cash flow 3 Debits 4 Expenses

What is accounting period?

An accounting period refers to the span of time in which a set of financial statements are released. Businesses and investors analyze financial performance over time by comparing different accounting periods.

What is accrual accounting?

A type of record-keeping adjustment, accruals recognize businesses’ expenses and revenues before exchanges of money take place. Accruals include expenses and revenues not yet recorded in companies’ accounts. Accruals affect businesses’ net income and must be documented before financial statements are issued.

What is preliminary understanding of accounting?

A preliminary understanding of accounting may help some business owners realize the necessity or benefit of hiring professional accountants to help them with their business’s finances. These professionals should consider learning the following terms: Accrual basis accounting. Cash basis accounting. Accounts payable.

What are the types of accrual accounts?

Types of accrual accounts include accrued interest, accounts receivable, and accounts payable. Companies note accrued expenses before receiving invoices for goods or services. Businesses indicate accrued revenue for goods or services for which they expect to receive payment later on.

How does depreciation accounting work?

The depreciation accounting method determines the decreasing value of a tangible asset over its lifetime. A business can make money from a depreciating asset by expensing or deducting part of the asset each year it is in use, for accounting and tax purposes. The Internal Revenue Service (IRS) requires companies to spread out the cost of depreciating assets over time.

Why is it important to have an accountant?

Effective accountants ensure that their organizations understand their legal obligations and financial performance, and that they can develop budgets and plan for the future. Managers use accounting information to make decisions related to buying or selling, investing, and pricing.

1. Business

Business is a human economic activity that includes the exchange of goods and services with the objective of earning profit. If an activity is done without the objective to earn a profit, it is not considered a business activity.

2. Financial Transaction

Financial Transactions are those transactions that have both giving and receiving aspects that can be measured and expressed in terms of money or monetary value.

4. Assets

Assets are the resources that have monetary value and are owned or controlled by individuals or organizations with the expectation of future benefit. They are reported on a company’s balance sheet. Its types are fixed assets, current assets, and liquid assets.

5. Liabilities

LIabilities are the amount payable by an organization to others. Example: loan payable, capital, salary payable, reserve for ___, rent payable, tax, etc.

6. Expenses

Expense is any amount paid for the day-to-day business operation, production process, and sales of goods or services in a regular manner or every year.

7. Income

Income is any amount received from the day-to-day business operation and sales of goods or services in a regular manner or every year.

8. Capital

Capital is the amount or property invested in the business and its operation by the owner. It is a liability since it’s not earned by the business and is payable to the owner or investor.

What is a formal document that communicates an independent accountant's?

Formal document that communicates an independent accountant 's: (1) expression of limited assurance on FINANCIAL STATEMENTS as a result of performing inquiry and analytic procedures ( REVIEW REPORT ); (2) results of procedures performed (AGREED-UPON PROCEDURES REPORT); (3) non-expression of opinion or any form of assurance on a presentation in the form of financial statements information that is the representation of management ( COMPILATION REPORT ); or (4) an opinion on an assertion made by management in accordance with the Statements on Standards for Attestation Engagements (ATTESTATION REPORT). An accountants' report does not result from the performance of an AUDIT.

When is a letter provided by a company's independent public accountant to an underwriter?

Letter provided by a company 's independent public accountant to an underwriter when the underwriter has a DUE DILIGENCE responsibility under Section 11 of the Securities Act of 1933 regarding financial information included in an offering statement.

What is adjusted basis?

Adjusted Basis. After a taxpayer's basis in property is determined, it must be adjusted upward to include any additions of capital to the property and reduced by any returns of capital to the taxpayer. Additions might include improvements to the property and subtractions may include depreciation or depletion.

What is total depreciation?

Total DEPRECIATION pertaining to an ASSET or group of assets from the time the assets were placed in services until the date of the FINANCIAL STATEMENT or tax return. This total is the CONTRA ACCOUNT to the related asset account.

What is an expression of an opinion in an auditor's report?

Expression of an opinion in an AUDITORS' REPORT which states that FINANCIAL STATEMENTS do not fairly present the financial position, results of operations and cash flows in conformity with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP).

What is a general journal?

An accounting entry made into a subsidiary ledger called the General journal to account for a periods changes, omissions or other financial data required to be reported "in the books" but not usually posted to the journals used for typical period transactions (the cash receipts journal, cash disbursements journal, the payroll journal, sales journal and so on) the entry is posted to the general ledger accounts directly and usually will be numbered itself, dated and have an explanation. Example: AJE# 1 12-31-2003, debit Cash in bank $1,000. Credit interest income $1,000, to record interest income on business bank account at year end, not recorded in cash receipts journal but credited by the bank. (Cross-reference bank reconciliation and account where it was found)

What is a formal record?

Formal record that represents, in words, money or other unit of measurement, certain resources, claims to such resources, transactions or other events that result in changes to those resources and claims.

What is a CPA?

Certified public accountant (CPA) definition: A designation given to an accountant who has passed a standardized CPA exam and met government-mandated work experience and educational requirements to become a CPA.

What is an account receivable?

Accounts receivable (AR) definition: The amount of money owed by customers or clients to a business after goods or services have been delivered and/or used. 2. Accounting (ACCG) Accounting (ACCG) definition: A systematic way of recording and reporting financial transactions for a business or organization. 3.

What is a company's current and long term liabilities?

Liabilities (current and long-term) Liabilities (current and long-term) definition: A company's debts or financial obligations incurred during business operations. Current liabilities (CL) are those debts that are payable within a year, such as a debt to suppliers.

What is cost of goods sold?

Cost of goods sold (COGS) definition: The direct expenses related to producing the goods sold by a business. The formula for calculating this will depend on what is being produced, but as an example this may include the cost of the raw materials (parts) and the amount of employee labor used in production. 11.

What is capital in finance?

Capital (CAP) definition: A financial asset or the value of a financial asset, such as cash or goods. Working capital is calculated by taking your current assets subtracted from current liabilities—basically the money or assets an organization can put to work.

What is asset class?

Asset classes. Asset class definition: An asset class is a group of securities that behaves similarly in the marketplace. The three main asset classes are equities or stocks, fixed income or bonds, and cash equivalents or money market instruments. 6.

What is CA in accounting?

Assets (fixed and current) definition: Current assets (CA) are those that will be converted to cash within one year. Typically, this could be cash, inventory or accounts receivable. Fixed assets (FA) are long-term and will likely provide benefits to a company for more than one year, such as a real estate, land or major machinery.

Why is it important to learn accounting terms?

Learning basic accounting terms can help you administer finances at work. A solid understanding of these terms will avoid confusion when discussing financial matters with others. In this article, we review frequently used accounting terms and what they mean.

What is audit accounting?

Audit. A professional analysis of a company's finances and its overall performance. An audit reviews accounting documentation to ensure accuracy. An audit is performed by certified public accountants (CPA).

What is accumulated spending?

The accumulated spending of money. Expenses are recorded for tax purposes and financial management.

What is a creditor?

The entity or person that provides the loan to the borrower. Creditors can come in loans, credit cards and mortgages.

What is financial inaccuracies?

The potential misinformation or inaccuracies in financial statements. This is a result of the lack of "control" over these documents.

What is the term for the entity or person that lends money to a debtor?

The entity or person that lends money to a debtor. This money, known as credit, is due back to the creditor.

What is the purpose of Comparing a bank account to the bank's records?

Comparing a bank account to the bank's records for accuracy and the same information on both records.

What is accounting period?

An accounting period is a period during the fiscal or calendar year in which accountants perform functions such as gathering and aggregating data and creating financial statements. The financial statements made during these periods are important for attracting potential investors or procuring loans from banks.

What is a business account payable?

Accounts payable is a crucial concept for any business operating with credit—every time a business purchases from a supplier on credit, an accounting entry is made in accounts payable.

Why do small businesses need accounting and bookkeeping?

At FinancePal, we recognize that most small business owners started their companies because they were experts in providing a good or a service—not at balancing a book. Plus, accounting and bookkeeping for startups can be complex and multi-faceted. That said, sound accounting and bookkeeping are imperative to manage any company’s financial health, guide decisions for growth initiatives, and ultimately ensure your business is in good standing with its tax obligations throughout the year.

What is cost of goods sold?

Cost of goods sold, commonly shortened to COGS (or, if applicable, referred to as cost of sales or cost of service), is simply how much it costs to produce products or services, including direct material or labor expenses . Cost of goods only includes expenses directly related to products and services. For example, a chandler business would consist of wax, wicks, glass, and ingredients in its COGS. Overhead, such as marketing spend, real estate, utilities, asset depreciation, shipping fees, and other indirect expenses do not count towards COGS.

What is chart of accounts?

An index of the financial accounts in a company’s general ledger, a chart of accounts provides a picture of all the financial transactions a company has conducted in a specific accounting period.

What is cash flow in business?

Cash flow is the total amount of money that comes into and goes out of a business.

What are assets in economics?

Resources with economic value. Assets can reduce expenses, generate cash flow, or improve sales for businesses.

Accounts Receivable (AR)

Accounts receivable is the balance of money owed by customers for a company’s goods or services. They are created when a company lets a customer purchase their goods or services on credit. On the balance sheet, AR appears under current assets.

Accounts Payable (AP)

Accounts payable is similar to accounts receivable, but instead of money to be received, it’s money owed. In a company, an AP department is responsible for making payments owed by the company to suppliers and other creditors. On a balance sheet, AP is listed as a current liability.

Accounting Period

An accounting period refers to the time at which a series of financial statements are issued. Businesses and investors evaluate financial performance by comparing different accounting periods over time. Accounting cycles track accounting activities—all within unique accounting periods—from when the transactions first occur to when they conclude.

Accrual Accounting

Accrual accounting is a method where income or expenses are recorded when a transaction occurs rather than when payment is received. The technique follows the matching principle, which says that revenues and expenditures should be recognized in the same period.

Asset (fixed and current) (FA, CA)

Current assets are benefits that will be converted to cash within one year. Generally, those assets could be cash, accounts receivable, or inventory.

Balance Sheet (BS)

A balance sheet is a financial statement that states a company’s assets, liabilities, and shareholders’ equity. It represents the state of a company’s finances at the moment in time. The balance sheet is one of the three—besides income statement and statement of cash flows—core financial statements used to evaluate a business.

Bank Reconciliation Statement

A bank reconciliation is a process to ensure that a company’s cash balance on the balance sheet corresponds to the amount on its bank statement. This process aims to ascertain the differences between the two to know whether accounting changes are needed.