13 Basic Accounting Terms Every Business Owner Should Know
Knowing basic accounting terms and what they mean makes it easy for you to understand the state of your finance as a business and to formulate strategies to help you profitably scale.
Here are some accounting terms that will help make conversation with your insourced accountant more meaningful.
- Certified Public Accountant (CPA)
This is a qualified accountant, a member of an officially accredited professional body of accountants.
- Balance Sheet
This is a statement of the assets, liabilities, and capital of a business for a particular financial period, detailing the balance of income and expenditure over the preceding time frame.
- Accounts Payable
The amount of money a company owes creditors (suppliers, etc.) in return for goods and/or services they have delivered.
- Accounts Receivable
This is money owed to your company by debtors.
- Cash Flow
This is the revenue or expense expected to be generated through business activities.
- Fixed and Current Assets
Assets are items that bring value, that are owned by the business.
- Current assets (CA)
Are those that will be liquidated to cash within one year.
- Fixed assets (FA)
Are long-term possessions that will provide benefits to a company for more than one year, such as a real estate, land or major machinery.
These are debts or financial obligations incurred during business operations.
- Current liabilities
(CL) are debts that are payable within a year, such as a debt to suppliers.
- Long-term liabilities
Are payable over a period of time greater than a year. An example of a long-term liability would be a multi- year mortgage for office space
- Return On Investment (ROI)
This is the measure to evaluate the financial position and performance of the business, this is relative to the capital invested.
- General Ledger
This is a complete record of financial transactions over the life of a company.
Now that you have an idea of what your accountant does and the terminology they use, contact us to insource a bookkeeper or a payroll officer.
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