Glossary

As you know, I'm studying Accounting and there is a lot of difficult terms related to this field of study. So, in this article, I will give you a definition of some important words in this profesion.

Account

A record or statement of financial expenditure or receipts relating to a particular period or purpose.

Asset

The properties used in the operation or investment activities of a business.

Liabilities

Claims by creditors to the property (assets) of a business until they are paid.

Equity

Equity is the value of an asset less the value of all liabilities on that asset.

Budget

An estimate of income and expenditure for a set period of time.

Income or Revenue

The gross increase in owner's equity (capital) resulting from the operations and other activities of the business.

Expenditure

Payment of cash or cash-equivalent for goods or services, or a charge against available funds in settlement of an obligation as evidenced by an invoice, receipt, voucher, or other such document. See also revenue expenditure, capital expenditure.

Capital

Wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing.

Cash flow

The total amount of money being transferred into and out of a business, especially as affecting liquidity.

Cash Cycle

Measures how long a firm will be deprived of cash if it increases its investment in resources in order to expand customer sales. It is thus a measure of the liquidity risk entailed by growth.

Credit

An entry entered on the right side of a journal or general ledger account that increases a liability, owner's equity or revenue, or an entry that decreases an asset, draw, or an expense.

Debit

An entry entered on the left side of a journal or general ledger account that increases an asset, draw or an expense or an entry that decreases a liability, owner's equity or revenue.

Finance

the management of large amounts of money, especially by governments or large companies.

Double Entry

Type of accounting/bookkeeping system that requires every transaction to be recorded in at least two places (accounts) using a debit and a credit. Every transaction is recorded in a "formal" journal as a debit entry in one account, and as a credit entry in another account. Periodically, usually monthly, the summarized balances from the journals are posted (transferred) to a formal business record called the general ledger.

Balance Sheet

The financial statement which shows the amount and nature of business assets, liabilities, and owner's equity (capital) as of a specific point in time. It is also known as a Statement Of Financial Position or a Statement Of Financial Condition.

Income Statement

The financial statement that summarizes revenues and expenses for a specific period of time, usually a month or a year. This statement is also called a Profit and Loss Statement or an Operating Statement.

Capital Statement

The financial report that summarizes all the changes in owner's equity (capital) that occurred during a specific period.

Interest

A sum paid or charged for the use of money or for borrowing money. And such a sum expressed as a percentage of money borrowed to be paid over a given period, usually one year.

Investment

The action or process of investing money for profit or material result.

Loan

A sum of money that is expected to be paid back with interest.

References:

• Bean Counter
• Business Dictionary
• Investopedia
• Dictionary.com