Do you understand accounting terms?
Like most industries accounting has buzzwords, if you are just jumping into business or starting with new accounting software there are likely to be some terms you are not familiar with:
General Ledger – A general ledger is a total record of all of your business’ financial transactions, both debit and credit included. This document is required to prepare all financial statements.
Accounts Receivable – is the amount of money your customers or clients owe you for goods or services you’ve provided—but that they have not yet paid.
Accounts Payable – is defined as the money your business owes creditors or suppliers and is considered a liability.
Journal Entries – Every time a transaction is made, whether money is spent or received, journal entries are made in the general ledger and corresponding accounts. Every journal entry should have two components: a debit and a credit.
Liquidity -is a company’s ability to meet its short-term debt obligations or any debt that will be paid back within 12 months.
Solvency – a company’s ability to meet its long-term debt obligations, or any financing or borrowed monies that will be paid back after 12 months.
What accounting terms have confused you in the past?