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Accounting Terms
Basic Accounting Terms
| Term | Definition |
|---|---|
| Accounting | The process of recording, summarizing, analyzing, and reporting financial transactions. |
| Asset | A resource owned by a company that has economic value and is expected to provide future benefit. |
| Liability | An obligation or debt owed by a company to an external party. |
| Equity | The residual value of assets minus liabilities; also known as owner's equity or stockholders' equity. |
| Revenue | Income generated from normal business operations, usually from the sale of goods or services. |
| Expense | The cost incurred in the process of generating revenue. |
| Profit (Net Income) | The financial gain after all expenses are subtracted from revenue. |
| Loss (Net Loss) | The financial deficit when expenses exceed revenue. |
| Balance Sheet | A financial statement that reports a company's assets, liabilities, and equity at a specific point in time. |
| Income Statement | A financial statement that reports a company's financial performance over a specific accounting period. |
| Cash Flow Statement | A financial statement that reports the cash generated and used by a company during a specific accounting period. |
| Debit | An entry on the left side of an account; increases asset and expense accounts, decreases liability, equity, and revenue accounts. |
| Credit | An entry on the right side of an account; increases liability, equity, and revenue accounts, decreases asset and expense accounts. |
| Chart of Accounts | A complete list of all accounts used by a company, typically organized by asset, liability, equity, revenue, and expense. |
| Journal Entry | The first step in the accounting cycle, recording a financial transaction in chronological order. |
| Ledger | A book or collection of accounts where financial transactions are summarized for each account. |
| Trial Balance | A list of all the general ledger accounts and their balances at a specific point in time, used to check for mathematical accuracy. |
| Depreciation | The systematic allocation of the cost of a tangible asset over its useful life. |
| Accrual Basis Accounting | An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged. |
| Cash Basis Accounting | An accounting method where revenues and expenses are recorded only when cash is received or paid. |
Created by:
kberhorst
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