Accounting terms are usually complicated for amateurs and new businesses. However, whether you are responsible for your company’s accounts, or have hired some professionals to manage them, it is very important that you are familiar with some basic concepts.
You may be interested in our entry: Basic glossary to understand accounting procedures.
Responsibilities may vary depending on the size of the company. Throughout this entry, we will introduce you to the accounting terms you should know.
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Fundamental accounting terms:
- Asset: A set of properties and rights that a company owns. These may be either tangible or intangible (e.g. patents).
- Liability: Refers to a company’s debts or obligations.
- Income: Represents an increase in a company’s shareholders’ equity, which does not result from any capital injection by the owners or shareholders.
- Expenditure: On the contrary, expenditures represent a loss of capital.
- Balance sheet: It is a financial statement that reports a company’s complete activity in relation to assets, liabilities, and shareholders’ equity at a specific point in time.
- Working capital: Shows the financial health of the company.
- Amortization: Refers to a loss in the value of a company’s intangible assets. Reserve funds are therefore necessary to recover the initial investment and make up for the loss.
- Petty cash: Petty cash may become one of the most familiar accounting terms. It is a small amount of cash kept on hand to pay for minor expenses.
You may be interested in our entry: Importance of ledgers for companies.
These are only some of the common accounting terms. The more you explore accounting terminology, the more familiar you will be with your company’s accounts.
We recommend that you seek the guidance of professionals whose expertise in the field will allow them to manage your company’s accounts. Contact us for more information.
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