Accounting Terms

Helpful to know basic accounting terms

Assets

Assets

Resources owned by a company that have economic value.

Liabilities

Debts or obligations owed by a company to external parties.

Equity

The residual interest in the assets of a company after deducting liabilities.

Revenue

The income generated by a company from its primary business activities.

Expenses

The costs incurred by a company in order to generate revenue.

Income Statement

Also known as the profit and loss statement, it summarizes a company's revenues, expenses, and net income (or loss) over a specific period of time.

Balance Sheet

A financial statement that provides a snapshot of a company's financial position at a specific point in time.

Cash Flow Statement

This statement tracks the inflow and outflow of cash from a company's operating, investing, and financing activities.

Accounts Receivable

The amount of money owed to a company by its customers for goods or services provided on credit.

Accounts Payable

The amount of money owed by a company to its suppliers or creditors for goods or services received on credit.

Depreciation

The systematic allocation of the cost of a long-term asset over its useful life.

Accruals

Expenses or revenues that have been incurred but not yet recorded in the accounting records.

GAAP

Generally Accepted Accounting Principles. These are a set of accounting standards and guidelines that companies must follow when preparing financial statements.

Audit

An independent examination of a company's financial records, systems, and processes to ensure accuracy and compliance with accounting standards.

Profit Margin

A financial ratio that measures a company's profitability by expressing its net income as a percentage of its revenue.