Maximize Your Profit with These Common Accounting Terms

• Account: A formal record of financial transactions, often grouped by customer or purpose.
• Accounting: A general term that refers to the tracking of a business's financial transactions, income, and expenses, and the use of this information in the business's financial decision-making.
• Accounts Payable: Amounts that a business owes to a creditor for goods or services.
• Accounts Receivable: Amounts owed to a business from sales completed or services rendered.
• Assets: Items that add value to a business, such as equipment, inventory or buildings.
• Audit: Inspection of a business's accounting records and procedures for accuracy and completeness. Conducted by a trained accountant, either internally or by an outside party.
• Bookkeeping: The starting point of the accounting process. Bookkeeping entails the accurate recording of the amount, date and source of a business's transactions.
• Budget: A financial plan estimating revenues and/or expenses over a certain period of time.
• Equity: Generally, this refers to the value of an individual or a business's ownership of an asset minus any debts or liabilities. Also refers to the total amount of a business's assets minus its liabilities.
• Ledger: A central location for maintaining all financial information, such as a physical ledger book or computer accounting software.
• Liabilities: Debts or obligations owed by a business, in the form of money, goods or services.

• Annual Report: Report to a company's stockholders that includes financial statements, balance sheets, cash flow statements, and other business information.
• Balance Sheet: Basic financial statement listing a business's assets, liabilities, and equity.
• Cash Flow Statement: A report providing data on a business's cash inflows (receipts) and outflows (disbursements) during a specified period.
• Financial Statements: Records that keep track of a business's financial activity.
• Profit and Loss Statement: A summary of revenue, costs and expenses during a given time period such as a fiscal quarter or year. Also called an "income statement."

• Accrual Method of Accounting: Method of accounting that records income when it is earned rather than received, and expenses when they are incurred rather than paid.
• Cash Method of Accounting: In contrast to the accrual method, the cash method of accounting records income when it is received, and expenses when they are paid.
• Double-Entry Accounting: System of accounting in which each transaction is recorded as two entries: a debit and a credit.
• Generally Accepted Accounting Principles: The GAAP are an authoritative set of standards and procedures set by various policy boards. They outline the recommended ways to prepare financial statements and report other accounting information.

• Credit: An increase in income or liabilities, or a decrease in assets or expenses. Increases equity.
• Debit: A decrease of income or liabilities, or an increase in assets or expenses. Decreases equity.
• Deficit: Financial shortfall that happens when liabilities exceed assets.
• Net Income: Profit of a business during a given period; total income or revenue minus expenses and losses.
• Net Worth: Total value of assets minus liabilities; similar to equity.
• Revenue: Income from all sources, including sales of goods or services, rent and interest income.

_{Sources: Investopedia; Nolo.com; MoneyInstructor.com; StartHereGoPlaces.com}