A List of 20 Common Accounting Terms Explained
For anyone new to the world of business, understanding some basic terms in accounting is key to the success of any business. These terms are used to organize financial information and help you understand the business operations of other companies. Here’s a list of 20 common accounting terms explained for you to become familiar with. In this article, we’ll explain what each term means, and what it means for your business. Hopefully, you’ll find this list useful.
Cash Flow: An accounting term used to describe the difference between the amount of money coming in and going out of a business is known as cash flow. Positive cash flow means that there is more money coming in than going out. Cash-basis accounting records cash receipts and disbursed expenses. A chart of accounts, or ‘accounting books’, is a list of accounts used to record financial transactions. The term “closing the books” refers to the process of closing the books for the year and opening them for the next. A company’s cash flow is an indicator of its ability to finance operations.
Journal Entry: Journal entries record business transactions. Each entry has a special code for ease of comparison. A balance sheet, on the other hand, reflects a company’s total assets. This list of terms can be incredibly useful in your business, and should be reviewed regularly. Hopefully, this list will help you understand some of the jargon you encounter every day in the business world. It’s also helpful to know the difference between accounts payable and receivable.
An accountant’s job is to keep track of a company’s financial records. Accounting involves recording financial transactions, summarizing the information, and reporting on the activities of the company. Accounts Payable and Accounts Receivable are examples of accounts that represent the assets and liabilities of a business. The process of accrual accounting is one of the most common types of accounting, recording financial transactions as they happen and paying out cash as it comes in. In addition, the term “amortization” is used to reduce debts, or reduce them through equal payments. Assets are items of value that are purchased or incurred.
Cost accounting: Cost accounting considers all costs that are involved in producing a product. Managerial accountants use cost accounting information to make decisions. Using cost accounting information, analysts can estimate a product’s cost. In addition to being an important part of the business world, financial accounting has many applications in strategic planning, fundraising, and operations management. This list of 20 common accounting terms is a helpful guide to the terminology you need to understand.
