Glossary for Common Accounting Terms

Good Accountants Glasgow and bookkeepers expect you to be fluent in the language. They want to help you make the most of your bling! So read on! Use this glossary when you are working with professional money mangers. It can be used to help you begin your journey toward financial literacy.

Bling Lingo is a glossary of common accounting terms…

ACCOUNTINGEQUATION:The basic accounting equation is used to calculate the Balance Sheet. That is:

Equities =

You can hold equity in the business without being the owner. This is known as a loss. Since we often have liabilities, the accounting equation…

assets = Liabilities + Owners Equity.

ACCOUNTS Business activity can lead to increases or decreases in your equity, liabilities, assets and other financial resources. These activities are recorded by your accounting system in accounts. An accounting system needs to track the movements of assets, liabilities, owners equity and owner liability on the Balancesheet. It also records the revenue and expense statements. You may have one account or several depending on the amount of detail you need.

ACCOUNTS MONEY PAYABLE: Sometimes called A/P. These are bills your business owes to government agencies or suppliers. If you have a ‘purchased’ it but have not paid it yet (like when it is purchased ‘on credit’), it will be considered an account payable. These are found under the Balance Sheet in the liability section.

ACCOUNTS Receive: Sometimes called A/R. A receivable is a term that describes the amount of money you owe someone for something they have sold. This is how much money customers owe your company for products and/or services they bought but have not paid yet. These accounts are located in the Balance Sheet’s Current Assets section.

ACCRUAL-BASIS ACCOUNTING With accrual-based accounting, you ‘account’ for sales and expenses at the time they occur. This method of accounting is the most accurate for your business activities. Mrs. Fernwicky would be happy to sell you something today. She may not pay you for it in two months. Even if the supply house statement arrives next month, paint that you bought today will still be accounted for. Cash basis accounting records the purchase when cash is received, and the expense when the cheque goes out. The picture you get of your company is not as accurate.

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