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Accounting Terminology

Posted on 27 February, 2014 at 3:52
Most trades and professions have their own ‘language’ and accountants are no exception. How many times have you heard certain account ting terms or phases and wondered what on earth the person using them is talking about?

Well in order to help you out, here are some of the more commonly used terms used by accountants in alphabetical order:

Accounts PayableAlso known as “Bought Ledger” or “Purchase Ledger”
Amounts companies owe suppliers for goods and services. Listed in the current liabilities section on the statement of financial position.

Accounts ReceivableAlso known as “Sales Ledger”
Amounts customers owe a company from sales of goods or services that the company expects to collect within one year. Listed in the current assets section on the statement of financial position.

A list of expenses that have been incurred and expensed, but not paid or a list of sales that have been completed, but not yet billed

Assets are resources controlled by the entity as a result of past events (usually transactions), from which future economic benefits are expected to flow to the entity.

Balance Sheet
Summary of a company's financial status, including assets, liabilities, and equity

A detailed plan, over a defined period (usually one year) with dollar amounts

Chart of Accounts
A listing of a company's accounts and their corresponding numbers

Cash Flow
A summary of cash received and disbursed, within a specified period of time, showing the beginning and ending amounts

At least one component of every accounting transaction is a credit. Credits increase liabilities and equity and decrease assets.

At least one component of every accounting transaction is a debit. Debits increase assets and decrease liabilities and equity.

Recognising the decrease in the value of an asset due to age and use

Amounts paid to shareholders out of current or retained earnings

Double-Entry Bookkeeping
System of accounting in which every transaction has a corresponding positive and negative entry (debits and credits)

The money that you take out of a business to either live on and/or pay any personal expenses. Drawings are part of the net profit and not a business expense.

Money owed to the owner or owners of a company

Financial Accounting
The preparation and presentation of financial reports showing business cash flow, profit/financial performance and financial position. The analysis and interpretation of financial statements to help business owners and managers make informed decisions about their business.

Financial Year
A company's usual 12 month reporting period.

Financial Statement
A record containing the balance sheet and the income/profit and loss statement

Fixed Asset
Long-term tangible property; building, land, computers, etc.

General Ledger
A record of all financial transactions within an entity

Gross Profit
The difference between a business’s total sales and its cost of sales. Listed as a category on the statement of earnings. Also called gross income.

The original billing from the seller to the buyer, outlining what was purchased and the terms of sale, payment, etc.

A record for recording transactions

A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

Management Accounting
Provides information about particular activities within a business, including budgets, costing and evaluating business activities.

Net Profit Also known as “Net Income” 
Money remaining after all expenses and taxes have been paid

The process of entering then permanently saving or “archiving” accounting data

Profit/Loss Statement
Also known as "Income Statement" A summary of income and expenses

The process of matching one set of data to another; i.e. the bank statement to the check register, the accounts payable journal to the general ledger, etc.

Retained Earnings
The amount of net profit retained and not paid out to shareholders over the life of the business

Total income before expenses.

Statement of Account
A summary of amounts owed to a vendor, lender, etc.

Stock  Also known as “Inventory”
Merchandise purchased or manufactured for resale at a profit

Trial Balance
A list of the general ledger accounts and their total balances

Turnover   Also known as “Operating Income”
Income generated from regular business operations  

Categories: accounting

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1 Comment

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5:55 on 25 September, 2014 
Every business has a perfect budget and partnership criteria. There are several corporate rules and regulation. Company accounts should also be maintained with good professionals.