Accounting Terms

Assets: 

• Definition - Resources owned by a business that have economic value and can be converted into cash

• Example - Cash, Inventory, Property

Liabilities:

• Definition - The financial obligations or debts a company owes to outsiders.

• Example - Loans, Accounts Payable, Mortgages

Equity:

• Definition - The owner’s claim on the assets of the business after all the liabilities have been deducted. 

• Example - Owner’s Capital, Retained Earnings

Revenue:

• Definition - The income earned by the business from its activities, such as sales of goods or services.

• Example - Sales Revenue, Service Fees

Expenses:

• Definition - The costs incurred by a business in order to generate revenue.

• Examples - Rent, Utilities, Salaries, Cost of Goods Sold

Account Receivable:

• Definition - Money owed to the business by customers for goods or services provided on credit.

• Example - A customer purchases a product and agrees to pay within 30 days

Accounts Payable: 

• Definition - Money the business owes to supplies for goods and services purchased on credit.

• Example - An outstanding bill for office supplies

Balance Sheet:

• Definition - A financial statement that summarizes a company’s assets, liabilities, and equity at a specific point in time. 

Profit and Loss Statement (Income Statement):

• Definition - A financial statement showing the company’s revenue, expenses, and profit or loss over a period of time.