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Basic Accounting Terminology Accounting Terms, Principles, and Concepts Prior to actually beginning work as an accountant, there is generally exposure to accounting terminology and concepts; whether in the form of classroom instruction or as an intern with on-the-job training.
However, rather than risk the possibility of an individual beginning work as a bookkeeper, or an accounting intern, without the necessary understanding of basic terms and concepts, we will provide a brief overview.
I personally believe the terms used in learning to calculate baseball statistics is more complicated than accounting terminology. Debits and Credits Every single transaction recorded in the accounting process falls into one of two categories: We could use the official definitions here, but I prefer to keep absorption levels and interest high, so we are going to use very simple definitions and examples.
Debit, value is added. Basic accounting 101, value is removed. For example, in your checking account, a deposit is a debit, a check is a credit. This is as simple as the definition gets in practical application. How you apply those transactions, depends upon the type of account you are working with.
Accounts Okay, now you will need to know what we mean by account.
Accounts are simply established to provide a record of individual business transactions as they apply to a certain area or item. Your personal checking account is established in order to provide a record of individual personal financial transactions you create when you write a check.
All of the accounts are listed in a general ledger. Today, the actual ledger book has long since been replaced by accounting software that creates a general ledger on the computer. The concept however has not been altered. The general ledger is the central location for maintaining all your accounts.
Journal entries refer to the posting or entering of the financial transactions to a particular account. Assets, Liabilities, Equity, Revenue and Expenses These are all the different types of accounts the accounting system utilizes. Assets are accounts that add value to your individual or business worth.
Liabilities are accounts that remove value from your individual or business worth. Equity is used to identify the individual contribution of money, or other financial equivalent, invested in individual or business worth. The revenue account is simply the account that tracks all income generated.
Expense accounts are the individual accounts setup to record the financial transactions that occur, as expenditure, in generating that income. An example of an asset would be your car. Your car has a dollar value attached to it. It adds value to your individual worth.
An example of a liability would be your car loan. The loan removes value from your individual worth. The equity in your car would be any money you paid down toward the purchase.
If you use your car to operate a pizza delivery service, the income generated from delivering pizzas would be known as revenue. Accounting practices give us a way to keep a record, or to give an accounting for your financial transactions.
An accounting system offers a method for checking, balancing, and reconciling all those transactions in order to produce accurate pictures of our financial health. Profit and Loss Reports, Balance Sheets, and Cash Flow Statements are the end result of compiling all the transactions into meaningful, usable information for individuals and business owners alike.Top 5 Financial Concepts in Accounting Here are five basic concepts covered in most introductory courses that can help you understand some key accounting principles.
1. What is GAAP? GAAP is an acronym for Generally Accepted Accounting Principles. These principles constitute preferred accounting treatment. Who sets GAAP? As a recent college grad entering the real world, this book provides a great introduction to learn accounting!
This book provides easy to understand explanations to complex terms related to accounting. ACCOUNTING BROUGHT TO YOU Our goal is to help you understand the basic concepts of accounting and how they relate to your business. One of the great things about AccountEdge is that it does all the debits and credits for you empowering you to manage your business.
Smarter. Williams Computer Consulting, located in Newark Ohio is a father son computer programming team.
We specialize in designing custom software solutions. Our focus is Microsoft development: Visual Basic, Microsoft Office, Access, Excel, Word, PowerPoint, FrontPage, HTML.
We do database programming, Web site design, front-end applications, accounting functions: General Ledger, Accounts Payable. Accounting allows organizations to identify how much money is coming in and being spent. Without accounting there is no way to accurately predict cash flows, raise money for projects, or know if you can afford to purchase equipment or hire new staff.