Accounting Terms Every Professional Should Know (Even If You’re Not in Finance!)
Accounting Terms include core concepts like assets (what a business owns), liabilities (what a business owes), and equity (the owners’ stake). Key financial reports include the balance sheet and the profit and loss statement, while other terms describe financial activities like cash flow, depreciation (the reduction in an asset’s value over time), and accruals (recognising revenue or expenses when they are earned or incurred, regardless of when cash is exchanged).
1. Journal:
The bookinwhich business transactions are first recorded.
2. Ledger:
A book that contains accounts of assets – liabilities, equity, eic.
3. Trial Balance:
A statement used to check the debit and credit equality of accounts.
4. Accounting:
The process of recording. Classifying summarising, and interpreting financial information.
5. Profit & Loss Account:
A statement that shows income and expenses for a period of time.
6. Owner’s Capital:
The owners investment in the business.
7. Drawings:
Owner’s Capital The owners investment in the business.
8. Balance Sheet:
A statement that shows the assets, liabilities, and equity at a specific date.
9. Loan:
An entry that records income or expenses not yer received or paid.
10. Liabilities:
Obligations or amounts owed by the business.
11. Equity:
Liabilities Obligations or amounts owed by the business.
12. Revenue:
Income generated by the business, e.g, sales.
13. Accrual:
Revenue Income generated by the business, e.g, sales.
14. Payables:
Amounts due to creditors for goods or services received.
15. Receivables:
Amounts due from customers for goods or services provided.
16. Expenses:
Receivables Amounts due from customers for goods or services provided.
17. Provision:
Receivables Amounts due from customers for goods or services provided.
18. Contingent Liabilities:
Possible obligations that might are depending on future events.
19. Cash Flow:
Movement of cash in and out of the business.
20. Inventory:
Stock of goods held for sale by the business.
21. Depreciation:
The allocation of the cost of a fixed asset over its useful life.
22. Basic Accounting Equation
Assets -> Liabilities+ Equity.
23. Cash Accounting:
A system that records income when received and expenses when paid.
