Basic Accounting Terminologies

What are the basic Accounting terminologies?

               This blog post is very important especially to the fresh accounting students. This may help them in order to discover first on what are the basic in accounting, because in accounting process a strong foundation is important.

• Accounting Equation - assets = liabilities + equity
• Accounts Payable - money owed to creditors, vendors, etc.
• Accounts Receivable - money owed to a business, i.e. credit sales
• Accrual Accounting - a method in which income is recorded when it is earned and expenses are recorded when they are incurred, all independent of cash flow
• Accruals - a list of expenses that have been incurred and expensed, but not paid or a list of sales that have been completed, but not yet billed
• Amortization - gradual reduction of amounts in an account over time, either assets or liabilities
• Asset - property with a cash value that is owned by a business or individual
• Audit Trail - a record of every transaction, when it was done, by whom and where, used by auditors when validating the financial statement
• Auditors - third party accountants who review an entity’s financial statements for accuracy and provide a statement to that effect
• Balance Sheet - summary of a company's financial status, including assets, liabilities, and equity
• Bookkeeping - recording financial information
• Budgeting - the process of assigning forecasted income and expenses to accounts, which amounts will be compared to actual income and expense for analysis of variances
• Chart of Accounts - a listing of a company's accounts and their corresponding numbers
• Cash-Basis Accounting - a method in which income and expenses are recorded when they are paid.
• Cash Flow - a summary of cash received and disbursed showing the beginning and ending amounts
• Closing the Books/Year End Closing - the process of reversing the income and expense for a fiscal or calendar year and netting the amount into “retained earnings”
• Cost Accounting - a type of accounting that focuses on recording, defining, and reporting costs associated with specific operating functions
• Cost of Goods Sold - expenses incurred in producing inventory; this may include materials, labors, storage costs, depreciation, and overhead.
• Credit - an account entry with a negative value for assets, and positive value for liabilities and equity.
• Debit - an account entry with a positive value for assets, and negative value for liabilities and equity.
• Depreciation - recognizing the decrease in the value of an asset due to age and use
• Dividends - amounts paid to shareholders out of current or retained earnings
• Double-Entry Bookkeeping - system of accounting in which every transaction has a corresponding positive and negative entry (debits and credits)
• Equity - money owed to the owner or owners of a company, also known as "owner's equity"
• Financial Accounting - accounting focused on reporting an entity's activities to an external party; ie: shareholders
• Financial Statement - a record containing the balance sheet and the income statement
• Fixed Asset - long-term tangible property; building, land, computers, etc.
• General Ledger - a record of all financial transactions within an entity
• Income Statement - a summary of income and expenses

References

• Accounting Terms