Refresh or expand your knowledge of various accounting terms by referring to our easy-to-understand glossary.
Imagine starting your first accounting job right out of school and encountering an accounting term that has you stumped. You’re sure you’ve encountered it before, but you can’t remember what it means. There are so many terms to know, right? You can’t just guess what it means, either, because accuracy in accounting records (and possibly your job) are at stake.
If you’d like to have a handy reference guide to an accounting glossary of terms, or would just like to brush up on your accounting lingo, then look no further than this article. Here we go!
Accounts payable
The expenses a business has incurred but has not yet paid.
Accounting period
The amount of time, either short term or long term, covered by financial statements.
Accounts receivable
Money due to a business for goods and services delivered or used but not yet paid for by clients or customers.
Accrual accounting
The recording of transactions when they happen rather than when payment is received or made.
Allocation
The division and assignment of costs to products, programs, periods, departments or accounts. For example, overhead costs such as rent and utilities are allocated to a company’s operations department.
Asset
Anything a company owns that has monetary value. This includes tangible assets, such as cash, equipment and property, and intangible assets, such as trademarks and copyrights.
Balance sheet
A statement of a business’ financial position that lists the assets, liabilities and stakeholders’ equity at a particular point in time.
Cash basis accounting
The recognition of revenue and expenses only when cash is exchanged.
Capital
Assets or financial resources that a business uses in furthering development or to generate income. In other words, these are the assets that enable the business to produce a product or service to sell to clients or customers.
Cost of goods sold (COGS)
The cost of producing the goods sold by a business. It includes direct costs, such as labor and material, but excludes indirect costs, such as distribution expenses.
A cash flow statement reveals the amount of cash that is entering and exiting a business.
Cash flow
The net amount of cash that flows into and out of a business.
Credit
An increase in liability, revenue or equity accounts or a decrease in an asset or expense accounts.
Debit
An increase in an asset or expense account or a decrease in liability, revenue or equity accounts.
Depreciation
The loss of value of an asset over time. For example, the amount of money a car is worth decreases over time.
General ledger
A complete record of a company’s financial transactions that is used to prepare financial statements.
Gross income
Also known as gross profit. The profit a business makes after subtracting the costs related to providing their services or making and selling their products.
Income statement
A report of a business’ revenues, expenses and overall profit or loss for a specific period of time.
Liability
The debts a company has yet to pay.
Liquidity
The ease with which an asset can be turned into cash.
Net income
The amount an individual or business earns after taxes and deductions are subtracted from gross income.
Did your business sell a piece of equipment? The money resulting from that sale is considered non-operating income.
Non-operating income
Income that isn’t generated from the sale of a company’s product or services. For example, the proceeds from the sale of old computers are considered non-operating income.
Overhead
The expenses that relate to running a business, such as rent, utilities and salaries.
Reconciliation
The comparison of two sets of records to ensure figures are correct and in agreement. This helps ensure that actual money spent matches money leaving an account.
Trial balance
A bookkeeping worksheet in which the balance of all ledgers are compiled into debit and credit account column totals that are equal.
Working capital
The amount of a company’s current assets minus the amount of its current liabilities.
Sources:
Accountingcoach.com
AllAccountingCareers.com
Indeed Career Guide
Investopedia
Paysimple.com
Conclusion
You’ve probably heard the saying “practice makes perfect.” The same concept applies to grasping accounting terms. The more you come across them and use them as you work with financial information, applying accounting principles, the more likely you will remember them.
Or, you can of course keep studying accounting terms until you commit them to memory.
Ready to put your knowledge of this accounting glossary of terms to the test? Then apply for one of our accounting or bookkeeping jobs – we’d love to welcome you aboard!
