Glossary: Common Accounting Terms

Competant bookkeepers, accountants, and other professionals will need to be conversant in the lingo. They want to see you shine, baby! Read and learn. This glossary can be used to communicate with professional money mangers. This glossary is a good starting point in your journey towards financial literacy, check my reference.

Bling Lingo: Glossary Common Accounting Terms

ACCOUNTING EQUATION. The balance sheet is based upon the basic accounting equation. It is:

Equity =

Owners might own equity in the business. This is called an obligation. We often have liabilities, so the accounting equation is often written…

Owner’s Equity = Liabilities

ACCOUNTS The business activity can affect your accounts, assets, liabilities, equity, or equity. These transactions are recorded in your accounting system’s accounts. A variety of accounts will be required to record the change in the asset, liability, owner’s Equity, revenue and expense on the Income statement. Depending on what kind of information you require, you might need several or more accounts.

ACCOUNTS PAYED: Also known under A/P. These are bills that your company owes suppliers and the government. If you have “bought” it but have not paid for it (e.g. if your business purchases on-account’), an account payable will be created. These are found in the liability area.

ACCOUNTS RECOVERY: Also known as A/R. An account receivable occurs when someone doesn’t pay for something you have sold. This is the amount that customers owe you money for products and services they have not paid yet. Find accounts receivable under the Current Assets Section of the Balance Sheet.

ACCRUAL BASIS ACCOUNTING – You ‘accountfor expenses’ and sales as soon as the transaction occurs. This accounting method gives you the best way of accounting for your business activities. Mrs. Fernwicky will pay you if you sell it to her today. However, she may pay you later. You can record paint you bought today, even if it’s due next month. Cash basis accounting records the sale in cash as soon the cash arrives. It can be hard to see what is happening at your company.