Glossary of Common Accounting Terms

You can learn the lingo from good bookkeepers or accountants. They want you to have a happier life. Please take the time and read. Keep this glossary on hand as you work alongside professional money managers. It will help you begin your journey to financial literacy, read more here.

Bling Lingo Glossary of Accounting terms…

ACCOUNTING EQUATION A balance sheet is created using the basic accounting equation. That’s:

Equities are assets.

The company’s equity can be held by any person, other than the owner. This is known to be a risk. This is called a responsibility.

Assets = Liabilities + Equities

ACCOUNTSBusiness activity is responsible for increasing and decreasing your assets and liabilities, as well as equity. Accounting software keeps these transactions in order. It is essential to keep track the income and expenses. Depending upon how detailed you need, you may have many accounts or hundreds.

ACCOUNTS PAYABLE Also known under A/P. These are bills your business owes the government or suppliers. You can make an accounting payable if the item has been “bought”, but you have not paid it yet (such as when your buy on account). These are included in the Balance Sheet’s liability section.

ACCOUNTS RECOVER: Also known as A/R. An account receivable is a situation in which you sell something to someone, but they don’t pay at that time. This is the amount of money customers owe your company in money for products and/or services they have not paid yet. This section shows your current assets.

ACCRUAL BACKROUND ACCOUNTING Expenses and sales are ‘accounted’ for when the transaction occurs. This is the best way of keeping track of your business activities. Even if Mrs. Fernwicky wants to pay you within two weeks, you’d still record the sale if she paid you today. It doesn’t matter if the supply house statement is due next month, paint that you have purchased today will still be in your account. Cash basis accounting records both cash received, and expenses paid when the check has been deposited. You might not be able to see what’s happening at your company.

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