Are you a small business owner looking to learn some essential accountancy terms? Then you are at the right place. This article will discuss some critical accountancy terms that a business owner should know before dealing with the essential aspects of accountancy.
A business owner must deal with various aspects of the business, including finances. Thus, one must adequately know accountancy and financial terms to deal with such finances. This article will deal with all the terminologies related to accountancy, so stay tuned. You can also learn more about these terminologies through an accountant in Halfmoon, NY, who can help you with the accountancy.
What are Common Accounting Terminologies for Small Business Owners?
- Accounts Payable (AP): Accounts payable is an aggregate amount of a company’s short-term obligations. These obligations are owed to creditors and suppliers. It will appear on the organization’s balance sheet as a current liability.
- Accounts Receivables (AR): Accounts Receivables are the total amount customers owe for the goods and services delivered. It is listed as a current asset on the balance sheet and adds value to the organization.
- Balance Sheet: A financial statement states the company’s liabilities, assets, and shareholder’s equity. It is considered a snapshot of the company’s finances.
- General Ledger: An accounting document gives complete information about the company’s financial transactions over a stipulated period. It states transactions, including revenue, equity, expenses and changes in assets and liabilities.
- Cash flow is the net amount of cash and its equivalents transferred in and out of the company. The money received is inflows and spent is outflows, and it is essential to make this analysis for accurate financial predictions.
- Cash Accounting: It is a simple procedure mainly used by small businesses. In this, cash receipts are entered when received, and expenses are recorded when paid.
- Accrual Accounting: It is a financial accounting method in which revenue is entered receiving the pay for the goods services; on the other hand, the expenses are recorded as they are incurred.
- Costs of Goods Sold: It is the direct cost of producing the goods sold by your company. It is considered a business expense stated under the business income statement.
So, these are some essential accounting terminologies you must understand as a business owner. You have to deal with these terms to ensure that your accounts are up to mark for the final financial records.