Whether you have hired a professional to look after your bookkeeping chores or you're doing it yourself; there are some basic accounting terminologies you need to be familiar with. Let's have a look at them:
1. General Ledger:
It can be defined as the comprehensive record of the financial transactions of an organization, counting its equity, revenue, assets, expenses and liabilities.
It is defined as the total money invested by the business owners or shareholders in the business subtracting any monies drawn out from the business.
The revenue of a business is the totality of the money generated by means of sales of services or goods, interests, company shares, properties, royalties, etc. prior to the deduction of expenses.
This can be defined as anything owned by the business which has a monetary worth. For instance, a business's tangible assets usually comprise of equipment, buildings, lands, accounts receivable, automobiles, cash etc. Moreover, intangible business assets consist of franchise contracts, client lists, lease arrangements, financial contracts, trademarks, copyrights, patents, and brand names etc. Assets are expressed in terms of their cash value on balance sheets.
These are defined as expenditures that a business incurs to generate revenues. There are two types of expenses; variable and fixed. Variable expenses vary on the basis of production or sales cycle while fixed expenses are defined costs that include salaries and rents etc.
Liability is a financial compulsion owed by the organization or business, that includes rents, income taxes, salaries, payments payable to suppliers, utilities, interest payments, etc. A liability can either be long or short term and is classified on balance sheets as per their categorization.
7. Fiscal Year:
This is a twelve month period constituting the beginning and conclusion of the yearly financial accounts for a business. A fiscal year does not essentially match to the usual calendar year.
8. Working Capital:
The accessible money that a business has for reinvestment or payment of bills is known as working capital. The working capital is equivalent to the worth of all existing assets (subtracting the liabilities) and is well-thought-out as a significant measure of a business health.
9. Balance Sheet:
This is a portrayal of the financial status of any business at a specific time period. It is classified into two major sections; where in the first section you can find assets while in the other, there are shareholders equity and liabilities.
10. Income Statement:
This is a kind of declaration to show your profits, expenses, and revenues for a specific point in time. An income statement actually depicts whether your business is being profitable at that particular time period or not.