Common accounting terms you should know
If you have a business, it’s a very good idea to learn some accounting terms. You never really know when you encounter financing and accounting terms, so the best option is to just take your time and learn this new stuff if possible. It will be worth checking out and you can obtain some great results this way too.
The asset is an item owned by your company and which will last a few years. It can be a vehicle, computer equipment or furniture. Every business tends to have assets, and these can be sold if needed. That being said, office supplies are not considered assets.
As you pay your taxes, you will be able to deduct some expenses. The deductions are designed to help you lower the amount of taxes you pay, and the idea here is that you get to make the taxable income lower.
The net income appears when you subtract all your expenses from the total earnings within your business. It’s important to focus on getting the best net income that you can, as that will be your profit basically.
A liability is considered an obligation that comes with purchasing a property or signing for a certain contract. If you fail to do what’s in the contract, you will be the one responding to the downsides, according to what was signed in the contract to begin with.
The tax credit is subtracted from the final tax amount. It’s provided by the IRS in different situations, but you have to study the tax laws first to see when and how it can be applied to your needs.
Balance sheets are very important for your business because they are a statement which shows the ownership equity, liabilities and assets. On top of that, a lot of people consider it tom be a snapshot of your company’s finances, which is something to keep in mind.
Accounts payable and receivable
If you sold something to the suppliers and they didn’t pay for it yet, then that means you have accounts receivable. But if you received something from a manufacturer and you didn’t pay for it yet, then that’s related to accounts payable. It’s important to know these terms, as they appear in the case of most businesses.
The income statement is a profit and loss statement. In the income statement you will get a summary of the losses and profits that the company had during a designated amount of time.
Knowing these accounting terms is a very good idea and it will prepare you for the business world. That’s especially true if you’re a new entrepreneur and just started to figure things out. Learning more and more about the business world can really help immensely, and it will provide you with a lot of insight. Take your time, study these great accounting terms and you will notice they are very helpful and convenient!