Introduction to Business and Accounting Terminology

Service Business: A business model focused on providing intangible services, rather than tangible products. Examples include consulting, healthcare, and education.
Business Ethics: The foundational principles and standards that direct proper conduct within the business world, emphasizing fairness, honesty, and integrity in all operations.
Business Plan: A structured, formal document detailing a company's objectives, strategic approaches, market analysis, and financial projections. It serves as an operational guide and a tool for attracting potential investors.

Creditor: An individual or entity that extends money or credit to another party. The party receiving the money or credit is referred to as the debtor.

Sole Proprietor: A business entity that is owned and operated by a single individual. This owner holds personal liability for all debts and obligations of the business.
Partnership: A business structure involving two or more individuals who collectively own the business and share in its profits, losses, and management responsibilities. The terms of this arrangement are typically outlined in a partnership agreement.

Accounting: The systematic process of recording, classifying, and summarizing financial transactions to generate useful information for informed decision-making.
Accounting Cycle: A defined sequence of steps undertaken during an accounting period. These steps involve identifying, recording, and summarizing financial transactions, culminating in the preparation of financial statements.
Net Worth: Represents the owner's equity in a company, calculated as the difference between the company's total assets and its total liabilities.
Withdrawals: The act of an owner removing cash or other assets from the business for personal use. These transactions are typically recorded within the equity section of the financial records.
Normal Balance: Refers to the typical side of an account (either debit or credit) on which an increase in that account type is recorded. This depends on whether the account is an asset, liability, equity, revenue, or expense.

Financial Statement: A formal and structured record that summarizes a company's financial activities. Key financial statements include the balance sheet, income statement, and cash flow statement.
Debit: An accounting entry that has the effect of increasing an asset account or an expense account. Conversely, it decreases a liability account or an equity account. Debits are always recorded on the left side of a T-account.
Credit: An accounting entry that increases a liability account, a revenue account, or an equity account. It decreases an asset account or an expense account. Credits are always recorded on the right side of a T-account.
T-Account: A simple visual framework used in accounting to separate and organize debits and credits for a specific individual account. Its structure resembles the letter "T."
Chart of Accounts: A comprehensive list of all the individual accounts utilized by a company. These accounts are systematically organized into categories, such as assets, liabilities, equity, revenue, and expenses.
Accounts Title: The specific name assigned to each individual account within the chart of accounts, for example, "Cash," "Salaries Expense," or "Revenue."

Liability: An obligation or debt that a company owes to external parties. Common examples include loans payable and accounts payable.
Accounts Payable: A specific liability account used to track amounts that a company owes to its suppliers or other creditors for goods and services it has already received but not yet paid for.
Accounts Receivable: An asset account that records amounts owed to the company by its customers. These amounts arise from goods or services that have been provided on credit.
Expense: The costs incurred by a company during its normal operational activities, which are necessary to generate revenue. Examples include rent, salaries, and utility bills.
Revenue: The income generated by a company primarily from its core business activities, such as the sale of goods or the provision of services.