11 Accounting Definitions Any Business Owner Should Know

Have you ever been in a conversation with your CPAs and not understood certain words they use? Nothing to worry about. For non-accountants, some terminology may result quite confusing. Yet, once you understand the basics, it's easier to keep track of your finances and make sound business decisions.

In this blog post, we'll break down some of the most common accounting terms so you can start using them like a pro! Next time you hire accounting services, you'll understand everything going on.

Basic Accounting Terminology That You Need To Know:

1) Accrual Basis Accounting: This is the most common type of accounting; it recognizes revenue when it's earned and expenses when they're incurred. 

2) Assets: Anything with value and can be converted into cash; examples include cash, inventory, and equipment. 

3) Balance Sheet: A financial statement that reports a company's assets, liabilities, and equity at a specific point in time. 

4) Capital: Another term for equity; it represents the ownership interest that shareholders have in a company.

5) Cash Basis Accounting: An accounting method that only recognizes transactions when cash is exchanged; revenue is recognized when received, and expenses when paid. 

6) Cash Flow: The movement of cash into and out of a company; it's used to measure a company's financial health. 

7) Expenses: Costs incurred in business; examples include rent, utilities, and payroll. 

8) Income Statement: A financial statement that reports a company's revenue and expenses over time; also called a profit and loss statement. 

9) Liability: Anything a company owes; examples include loans, credit card debt, and accounts payable. 

10) Net Income: The amount of income left after all expenses have been deducted from revenue.

11) Owner's Equity: The amount of ownership that a business owner has in the company; it's equal to the assets minus the liabilities.

Are You Looking For Reliable Accounting Services?

Now that you know some of the basics, it's time to put them into practice! If you need accounting services, Roberts Accounting is here to help. We're a reliable and professional team of accountants based in Los Angeles.

Our CPAs have years of experience in public accounting. They have helped clients all over the state to gain control over their finances, keep accurate records and improve their decision-making. Contact us today to learn more about how we can help you with all your accounting needs!