Glossary of Common Accounting Terms

Good bookkeepers and Accountants Glasgow will help you learn the lingo. They want to help make your life more beautiful. Take the time to read. As you work with professional money managers, keep this glossary close at hand. You can use it to start your journey towards financial literacy.

Bling Lingo Glossary of Accounting Terms…

ACCOUNTING EQUATION The balance sheet is based off the basic accounting equation. That’s:

Equities = assets.

A person other than the owner can own equity in the company. This is called a risk. This is called a liability.

Assets = Liabilities + Equity.

ACCOUNTSBusiness activities are responsible for increases and decreases of your assets and liabilities as well as equity. These activities are kept in accounts by the accounting system. It is necessary to keep track of the income and expenses, as well as the asset, liability, and owner’s equity on the Balance sheet. Depending on how much detail you require, you might have several accounts or hundreds.

ACCOUNTS PAYABLE Also known As A/P. These are bills your company owes the government, or to your suppliers. If you have “bought” it, but have not paid for the item yet (such as when you buy on account’), then you can make an account payable. These are listed in the Balance Sheet’s liability section.

ACCOUNTS RECOVERY: Also known under A/R. If you sell something to someone but they don’t pay that moment, you create an account receivable. This is the amount that customers owe you in money for products and services they bought from your company but haven’t yet paid. This section shows the balance sheet’s current assets.

ACCRUAL BACKGROUND ACCOUNTING With accrual accounting, expenses and sales are ‘accounted for’ at the moment the transaction occurs. This is the best way to keep track of your business activities. Even if Mrs. Fernwicky plans to pay you in two weeks, you would still record the sale if you sold it today. It doesn’t matter if you pay next month for the supply house statement, if you purchase paint today, it is included in your account. Cash basis accounting records both the cash received and the expense paid when the check is deposited. You may not get an accurate picture of what is going on at your company.