Glossary

Proper accounting knowledge helps business owners better track their expenditures, income, and ensure statutory compliance. In this glossary page, you will learn different accounting and finance terms.

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A

Accruals:

This term can refer to two situations. It can mean sales that are complete but are yet to be billed. In addition, it may mean incurred expenses that you have yet to pay for. Since they can be either positive or negative, they can impact both the balance sheet and income statement.

B

Bad Debt Expense:

When you sell goods on credit, you hope that the client will pay. However, there is a chance that they will not pay. If they do not pay, it becomes a bad debt expense. Indicating it on the income statement allows you to write off the debts that were not paid.

C

Cash-Basis Accounting:

This refers to an accounting method whereby you record payments the moment they are received or processed. They do not include accounts receivables.

D

Dividends:

Company earnings shared amongst shareholders. The company determines how much to share and the form in which it comes. It can be cash, property, stocks, or anything else.

E

Expenses:

They are the financial cost of airing something. They can be a payment for a service or raw materials. They can also be fixed, varied, or accrued.

F

Fiscal Year:

The period of time that a company uses for accounting. Although they can coincide with the calendar years, it is not a necessity.

G

General Ledger:

A record of a company’s financial transactions for the entire period that it has been existent. It includes capital, expenses, assets, and revenues.

J

Journals:

An account where transactions are recorded as they occur. These transactions are later transferred to the official records or general ledger.

L

Liabilities:

The debts that a company has incurred and which should be paid in the short or long-term. Mortgages and credit card balances fall under this category.

M

Market Value:

An estimation of the value of a company by investors. The value is determined by analyzing financial documents.

P

Profit and loss Statement:

A record showing the earnings, expenses, and net profits or losses of a company over a specific period of time.

R

Revenue:

The amount of money that a company collects from providing services or selling a products without deducting the expenses.

T

Trial Balance:

The exercise through which final figures are confirmed before they are used to generate a statement.

W

Working Capital:

The amount of money that a company needs to spend on specific items for the business. It is also a reflection of operating liquidity.