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What Accounting Terms Do You Need To Know?

Accounting Terms


Stepping in the accounting world is a nightmare for many. As an Entrepreneur, it is important to know all about the accounting world. After all, it is very important to keep the finance of company in check. Then how is an Entrepreneur supposed to deal with this nightmare? Well, here is a secret. Accounting world is not a nightmare. It is rather easy and fun to understand. The only thing which will scare you is the use of heavy terms. It feels as if accountants or people associated with accounting have their own code language. But once you know what these terms are, accounting world will become a daydream rather than a nightmare. So, here are a few basic terms that can help you reduce the fear of accounting world.
  • Accounting: It is a process of handling all the financial data of the company. It includes reporting, measuring and analyzing.
  • Accounts Payable: It is the money that is owed by a company to some other company or firms. These company and firms here are known as creditors.
  • Accounts Receivables: It is the money that is owed by an individual to a company. Talking about your company, when someone owes to your company. That debt is your company's accounts receivables.
  • Accruals: These are the expenses that have been earned but are not yet mentioned in the accounts.
  • Asset: It is a kind of property owned by a company that has a cash value. There are many types of assets. Liquid Assets refers to those assets which can be turned into money very easily and quickly. Long-term assets and short-term assets as the name suggest are those assets which have a long period of value and a short period of value respectively.
  • Audit: Examination or inspection of company’s financial statements by an independent body refers to audit.
  • Auditors: One who performs an audit. One who inspects the financial statements of a company.
  • Balance Sheet: It is a summary of the financial status of a company.
  • Bankruptcy: A legal status which shows the company's inability of paying debts.
  • Bookkeeping: It is a part of accounting. It includes the recording of every financial transaction of the company.
  • Capital: They are simply the assets and money owned by the company.
  • Cash Flow: It is a summary of the money that is being transferred in and out of a company.
  • Collateral: These are the assets of a company which acts as a security when a loan is taken.
  • Dividends: It is the amount a company pays to the shareholders out of its earnings.
  • Equity: The difference between assets and liabilities of a company.
  • Financial Statements: It is nothing but balance sheet with all the income statements included.
  • Inventory: An asset that reflects the cost of products of a company that is held for sale.
  • Liability: An amount of money a company owes to others.
  • Ratios: Comparison of the financial statement of a company in order to evaluate and analyze the financial status of the company.
  • Screening: Process of analyzing capital budgeting projects of a company.
  • Working Capital: The net amount of money a company holds. It includes assets and liabilities also.
These are few important as well as basic accounting terms. For any further queries, you can contact us, at LegalRaasta. We will be more than happy to assist you.

This article has been contributed by Simmi Setia, Content Writer at LegalRaasta, an online portal for GST Software, GST Return Filing, GST Registration, Section 8 Company Registration, Nidhi Company Registration, IEC Registration, Fssai License, File ITR Online.

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