Basic Accounting Terminology
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1.Capital
2.Liability
3.Assets
4.their financial health. Accountants do this work by keeping track of expenses, profits, and losses, making use of this accounting formula:

Assets = Liability + Equity

Effective accountants ensure that their organizations understand their legal obligations and financial performance, and that they can develop budgets and plan for the future. Managers use accounting information to make decisions related to buying or selling, investing, and pricing.

The following guide includes basic accounting terms, definitions, and industry acronyms. Business owners can use this accounting dictionary to better understand their financial records and when working with accountants or accounting software. Prospective students can use the directory of terms to familiarize themselves with basic concepts. Accounting majors can even use this page as a study guide.

How Business Owners Can Use This Accounting Terms Guide
Business owners may find this accounting dictionary useful for understanding basic accounting terms, concepts, and acronyms. A broad understanding of the major principles of accounting can help business owners keep track of and analyze their business’s financial information.

This guide can help business professionals identify what type of accounting method to use for their companies and understand which types of financial records they must maintain to meet their financial and legal obligations.

Business owners may also understand the benefit of setting up functional accounting systems, including how to use that information to make better, more profitable business decisions. A preliminary understanding of accounting may help some business owners realize the necessity or benefit of hiring professional accountants to help them with their business’s finances.

These professionals should consider learning the following terms:

Accrual basis accounting
Cash basis accounting
Accounts payable
Accounts receivable
Certified public accountant





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Basic Accounting Terminology and Concepts

February 3, 2021 | Staff Writers

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Accounting — the process of recording, assessing, and communicating financial transactions — helps individuals and organizations understand their financial health. Accountants do this work by keeping track of expenses, profits, and losses, making use of this accounting formula:

Assets = Liability + Equity

Effective accountants ensure that their organizations understand their legal obligations and financial performance, and that they can develop budgets and plan for the future. Managers use accounting information to make decisions related to buying or selling, investing, and pricing.

The following guide includes basic accounting terms, definitions, and industry acronyms. Business owners can use this accounting dictionary to better understand their financial records and when working with accountants or accounting software. Prospective students can use the directory of terms to familiarize themselves with basic concepts. Accounting majors can even use this page as a study guide.

How Business Owners Can Use This Accounting Terms Guide

Business owners may find this accounting dictionary useful for understanding basic accounting terms, concepts, and acronyms. A broad understanding of the major principles of accounting can help business owners keep track of and analyze their business’s financial information.

This guide can help business professionals identify what type of accounting method to use for their companies and understand which types of financial records they must maintain to meet their financial and legal obligations.

Business owners may also understand the benefit of setting up functional accounting systems, including how to use that information to make better, more profitable business decisions. A preliminary understanding of accounting may help some business owners realize the necessity or benefit of hiring professional accountants to help them with their business’s finances.
Asset types include fixed, current, liquid, and prepaid expenses. Assets may include long-term resources like buildings and equipment. Current assets include all assets a company expects to use or sell within one year. Liquid assets can easily convert to cash in a short timeframe. Prepaid expenses include advance payments for goods or services a company will use in the future.