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Basic Accounting Terms List

1. Accounts Receivable AR
Definition: The amount of money owed by your customers after goods or services have been delivered and/or used. See how it works here.

2. Accounting ACCG
Definition: A systematic way of recording and reporting financial transactions.

3. Accounts Payable AP
Definition: The amount of money you owe creditors (suppliers, etc. in return for good and/or services they have delivered. See how it works here.

4. Assets !i"e# an# Current$ !A an# CA

Definition: !urrent assets are those that will be used within one year. Typically this could be cash, inventory or accounts receivable. "i#ed assets (non current are more long$term and will likely provide benefits to a company for more than one year, such as a building, land or machinery.

%. Balance &'eet B&

Definition: A financial report that summari%es a company&s assets (what it owns , liabilities (what it owes and owner's e(uity at a given time.

(. Ca)ital CAP
Definition: A financial asset and its value, such as cash or goods. )orking capital is calculated by taking your current assets subtracted from current liabilities.

*. Cas' !lo+ C!
Definition: The revenue or e#pense e#pected to be generated through business activities (sales, manufacturing, etc. over a period of time. *aving a positive cash flow is essential in order for businesses to survive in the long run.

,. Certi-ie# Public Accountant CPA

Definition: A designation given to someone who has passed a standardi%ed !+A e#am and met government$mandated work e#perience and educational re(uirements to become a !+A.

.. Cost o- Goo#s &ol# C/G&

Definition: The direct e#pense related to producing the goods sold by a company. This may include the cost of the raw materials (parts and amount of employee labor used in production.

10. Cre#it CR
Definition: An accounting entry that may either decrease assets or increase liabilities and e(uity on the company&s balance sheet, depending on the transaction. )hen using the double$entry accounting method there will be two recorded entries for every transaction: a credit and a debit.

11. 1ebit 1R
Definition: An accounting entry where there is either an increase in assets or a decrease in liabilities on a company&s balance sheet.

12. 2")enses !i"e#3 4ariable3 Accrue#3 /)eration$ !23 423 A23 /2

Definition: The fi#ed, variable, accrued or day$to$day costs that a business may incur through its operations. ,#amples of e#penses include payments to banks, suppliers, employees or e(uipment.

13. Generally Acce)te# Accounting Princi)les GAAP

Definition: A set of rules and guidelines developed by the accounting industry for companies to follow when reporting financial data. "ollowing these rules is especially critical for all publicly traded companies.

14. General Le#ger GL

Definition: A complete record of the financial transactions over the life of a company.

1%. Liabilities Current an# Long5Term$ CL an# LTL

Definition: A company&s debts or financial obligations it incurred during business operations. !urrent liabilities are those debts that are payable within a year, such as a debt to suppliers. -ong$term liabilities are typically payable over a period of time greater than one year. An e#ample of a long$term liability would be a bank loan.

1(. 6et 7ncome 67

Definition: A company&s total earnings, also called net profit or the .bottom line./ 0et income is calculated by subtracting totally e#penses from total revenues.

1*. /+ner8s 29uity /2

Definition: An owner's e(uity is typically e#plained in terms of the percentage amount of stock a person has ownership interest in the company. The owners of the stock are commonly referred to as the shareholders.

1,. Present 4alue P4

Definition: The value of how much a future sum of money is worth today. +resent value helps us understand how receiving 1233 now is worth more than receiving 1233 a year from now. See an e#ample of the time value of money here.

1.. Pro-it an# Loss &tatement P:L

Definition: A financial statement that is used to summari%e a company's performance and financial position by reviewing revenues, costs and e#penses during a specific period of time4 such a (uarterly or annually.

20. Return on 7nvestment R/7

Definition: A measure used to evaluate the financial performance relative to the amount of money that was invested. The 567 is calculated by dividing the net profit by the cost of the investment. The result is often e#pressed as a percentage. See an e#ample here.