General Accounting Terms
Account: A record of all financial transactions related to a specific item or activity.
Assets: Resources owned by a business that have economic value (e.g., cash, inventory, property).
Liabilities: Obligations or debts a business owes to external parties (e.g., loans, accounts payable).
Equity: The owner’s interest or claim in the business, calculated as Assets - Liabilities.
Revenue: Income generated from the sale of goods or services.
Expenses: Costs incurred in the process of generating revenue (e.g., rent, salaries, utilities).
Profit: The financial gain, calculated as Revenue - Expenses.
Loss: The financial deficit when expenses exceed revenue.
Capital: The financial resources or funds invested in the business by its owner(s).
Depreciation: The reduction in the value of an asset over time due to wear and tear or obsolescence.
Accounting Processes
Journal Entry: The recording of financial transactions in the accounting journal.
Ledger: A collection of accounts that shows the transactions affecting each account.
Trial Balance: A report that checks the equality of total debits and credits in the ledger.
Financial Statements: Reports that summarize a company’s financial performance (e.g., income statement, balance sheet).
Double-Entry Accounting: A system where each transaction affects at least two accounts (debit and credit).
Tax and Compliance Terms
Taxable Income: The portion of income subject to taxation after allowable deductions.
Tax Deduction: Expenses that reduce taxable income.
GST/VAT (Goods and Services Tax/Value-Added Tax): A tax levied on the sale of goods and services.
Payroll: The process of calculating and distributing employee wages, including tax deductions.
Audit: The examination of financial records to ensure accuracy and compliance.
Financial Performance
Net Income: The profit remaining after all expenses, taxes, and costs have been deducted from revenue.
Gross Income: Revenue minus the cost of goods sold (COGS).
Operating Income: Income from core business activities, excluding non-operating items.
Cash Flow: The movement of cash into and out of a business.
Break-Even Point: The point at which revenue equals expenses, resulting in no profit or loss.
Cost and Inventory Management
Cost of Goods Sold (COGS): The direct costs of producing goods or services sold by a business.
Overhead Costs: Indirect expenses like rent, utilities, and administrative salaries.
Inventory: The goods and materials a business holds for sale or production.
FIFO (First In, First Out): An inventory valuation method where the oldest items are sold first.
LIFO (Last In, First Out): An inventory valuation method where the newest items are sold first.
Key Ratios and Metrics
Current Ratio: Measures a company’s ability to pay short-term liabilities with current assets.
Debt-to-Equity Ratio: Shows the proportion of debt used compared to equity in financing.
Earnings Per Share (EPS): The portion of a company's profit allocated to each share of stock.
Return on Investment (ROI): A measure of the profitability of an investment.
Working Capital: The difference between current assets and current liabilities.
Other Accounting Terms
Accounts Payable: Money a business owes to suppliers.
Accounts Receivable: Money owed to a business by customers.
Accrual Basis: Accounting method where transactions are recorded when they occur, not when cash is exchanged.
Amortization: Spreading the cost of an intangible asset over its useful life.
Budget: A financial plan outlining income and expenses for a specific period.
No comments:
Post a Comment