Understanding Accounting Basics
- What is Accounting?
- Accounting is the process of recording and categorizing a company’s financial transactions. The information is organized into reports that show the financial health of a company.
- Accounting Terms Defined
- Accounts Payable Money owed by a company to its suppliers that has not been paid for.
- Accounts Receivable Money customers owed to a company for products or services that have been delivered but not paid for.
- Assets Anything that a company owns that has current or future economic value.Â
- Chart of Accounts A list of financial accounts in a company’s general ledger.
- Equity Value of a company after deducting liabilities from its assets
- General Ledger A record-keeping system for a company’s financial transactions.
- Journal Entry A record of the company’s transactions in the accounting system.
- Liabilities Financial obligations a company owes to third parties, such as creditors, suppliers, or employees.
- Revenue Amount of money a company earns from selling products or services.
- Important financial reports
- Profit & Loss Statement A financial report showing a company’s revenues, expenses, and profitability over a period of time.
- Balance Sheet A financial statement that reports a company’s assets, liabilities, and shareholder equity at a point in time.
- Cash Flow Statement A financial statement that summarizes the amount of cash flowing into and out of a company.
- Trial Balance A financial statement that lists all of a company’s general ledger accounts closing balances at a point in time.
