Accounting Terms-Common terms using in Accountancy

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Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers.[1]  The communication is generally in the form of financial statements  that show in money terms the economic resources under the control of management; the art lies in selecting the information that is relevant to the user and is reliable.

Accounting – process of identifying, measuring, and reporting financial information of an entity

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

Asset – property with a cash value that is owned by a business or individual

Balance Sheet – summary of a company’s financial status, including assets, liabilities, and equity

Bookkeeping – recording financial information

Cash-Basis Accounting – a method in which income and expenses are recorded when they are paid.

Chart of Accounts – a listing of a company’s accounts and their corresponding numbers

Cost Accounting – a type of accounting that focuses on recording, defining, and reporting costs associated with specific operating functions

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

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

Job Costing – system of tracking costs associated with a job or project (labor, equipment, etc) and comparing with forecasted costs

Journal – a record where transactions are recorded, also known as an “account”

Liability – money owed to creditors, vendors, etc

Net Income – cash or other property that can be easily converted to cash

Loan – money borrowed from a lender and usually repaid with interest

Net Income – money remaining after all expenses and taxes have been paid

Non-operating Income – income generated from non-recurring transactions; ie: sale of an old building

Note – a written agreement to repay borrowed money; sometimes used in place of “loan”

Operating Income – income generated from regular business operations

Payroll – a list of employees and their wages

Revenue – total income before expenses.

Single-Entry Bookkeeping – system of accounting in which transactions are entered into one account