Basic Accounting Terms Every Business Owner Should Know

One of the tasks that every business owner should handle is an accounting section or if you want to make a bookkeeper or hire a professional you need to feel familiar with some basic accounting terms.
The accounting terms used in the financial statements.

Fiscal year: The fiscal year is a period of 12 months which is the beginning and the end of the annual financial record for the business. Not always in accordance with the calendar year. For example, a seasonal business like agriculture often uses fiscal years that ends in autumn.

Assets are something of a monetary value owned by a business. Business-specific assets include land, buildings, equipment, cash, vehicles, accounts receivable, etc. Tangible assets include a client list, franchise agreement, profitable finance or lease agreement, brand name, patent rights, copyrights, etc. Assets are expressed in terms of their cash value on the balance sheet.

Liabilities are financial obligations borrowed by the company, including salary, income tax, lease, necessities, payment of interest, indebtedness to suppliers, etc. Liabilities can be short or long-term and grouped on the balance sheet in order of classification.

Revenue: A business gross income is the sum of all the money generated through good sales and services, stocks within the company, interest, royalty, property, etc. Before reducing costs.

Cost: Expenses incurred by the business to generate income. Costs can be corrected (such as rental fees, salaries, etc.).) or variables, such as those that fluctuate depending on sales or production cycles.

Accounts Receivable: A certain amount of money is owed to the customer/client for the goods and services provided. Because the client has a legal obligation to pay, the amount is entered as an asset on the balance sheet.

Capital (also known as working capital): Working capital is money that the company has available to pay bills or reinvest. It is equal to the value of all current assets minus liabilities and is considered a key measure of business health.

Bad debt: Debts that happen when customers don't pay the amount owed. They are listed as fees on financial statements.

In other respects, that this arises as a reaction to their attitude toward him, so the prophet would like if the punishment was revealed to them, but then the Prophet was commanded to be patient and not ask for a punishment for them. Surely the punishment shall befall them.

Depreciations: Depreciation occurs as business assets such as vehicles and equipment decreases in value over time due to use or obsolance. Depreciation is an important tax reduction--the percentage of the original value of the asset can be written annually based on depreciation rate.

Equity is the amount of money invested in the company by the owner of the company (shareholders) without the money incurred in the form of capital.

Advantages for business owners. Stock can be issued on a regular or non-regular basis and may consist of cash or additional stocks in the business. For tax purposes, a business owner may prefer the benefit of a salary.

Two main accounting methods

Cash Basic accounting: Cash base accounting is a simple method to keep track of income and expense-bills recorded when customers make payments and fees are recorded when paid. It is most commonly used by a single owner and a small business that does not retain inventory. If customer pays by credit revenue is not recorded until full payment is received, regardless of invoice date. Similarly, if the business provides a credit fee, the fee is not recorded until the invoice is paid in full.

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Policy accrual of Accounting: Public companies and most businesses and professionals in the United States and Canada are required by law to use an accounting accrual basis, which requires revenue recorded when customer bills and expenses Recorded at the time of occurrence, not when actual payment is made.  The character accounting policy gives a more accurate overview of the long-term health of the business.

Financial statements

Sheet Balance: A balance sheet is a snapshot of the company's financial status at a certain point in time. It is organized into two main columns, with assets in one column and obligations as well as shareholders on the other.

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The earnings statement shows your income, costs, and profits for a given period. This is a snapshot of your business that shows whether your business is profitable at that point in time:

Revenue-cost = profit/loss

Cash flow statement shows the movement of cash and cash equivalence in and out of business. Most businesses fail to do so due to chronic cash flow issues.

A general cash book is a complete record of the company's financial transactions for the lifetime of the organization, including assets, revenues, costs, and equity.
Accounting Made Easy

If you decide to do some or all accounting yourself, there are a number of inexpensive, easy to learn, cloud-based accounting packages available for small businesses that can help you:

Create an invoice

•     Record fees
• Used as POS (Point Of Sale) system
• Make it easier to calculate, charge, and keep track of taxes.
• Create a financial statement

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