Accounting Basics Need to Know Terms

Posted on Mar 27, 2013 | 0 comments

Whether you are a business owner or an individual trying to organize your personal finances, accounting terms can be hard to understand. These accounting terms will help you understand your business even better while assisting you to prepare for tax return, comprehend tax reports and to communicate your business’s financial situation to your associates.

  1. Liability – A liability in its accounting sense is something that is given a monetary value which is supposed to be paid by the business in the future.
  2. Net Income – This is the total earnings that your business has acquired after all the expenses and payment dues of running the business are deducted.
  3. Accounts Payable – These are dues and bills that your business has not paid. They usually include those bills from your suppliers, vendors or creditors. The total sum of all your accounts payable is listed as a current liability on your business’s balance sheet.
  4. Balance Sheet – This is the statement of your company’s financial situation that displays its assets, ownership equity and liabilities in a certain period of time. It’s often addressed as the snapshot of the company’s financial disposition.
  5. Revenue – This is the amount of income that a business receives in its normal business activities. This may include revenues from dividends, royalties or interests paid to them by other companies.
  6. Income Statement – This is the summary of the business’s profits and losses in a certain period of time. Income statement also show the revenues earned in a specific period and all the operating expenses during same period.
  7. Deduction – This is the amount to be deducted from the business’s income. This includes operating expenses and tax deductions.
  8. Asset – Any item that is acquired by the business that is expected to stay of use for several years such as machineries and equipment.

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