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As an accounting student in college, you need to get yourself acquainted with the basic concepts of accounting. If you don't familiarize yourself with these basic accounting terms, you'll find it difficult to relate with other fellow accountants after graduation from the university.

Accounting

When a professor uses a term whose meaning you do not know in class, don't hesitate to ask for clarification since you may sometimes find it challenging to distinguish terms whose meaning is closely related. If need be, use flashcards to memorize meanings.

If you don't familiarize yourself with these basic accounting terms, you'll find it difficult to relate with other fellow accountants after graduation from the university.

Furthermore, you could involve fellow students to make the learning sessions exciting and engaging. In addition to learning the meaning of accounting terms, you also need to invest time to do all the tasks assigned to you. If you don't have time with your “accouting paper”, you can contact any accounting homework services for help.

11 Basic accounting terms you should know.

Below are eleven basic accounting terms everyone should know, and they are as follows:

1). Income

For a company, income refers to net profit. This means what is left after expenses and taxes is deducted from revenue. For individuals, however, "income" generally refers to the total wages, salaries, tips, rents, interest, or dividends received over some time.

2). Fiscal Year

You've probably heard this term been used a few times. A fiscal year does not necessarily represent the calendar year. Instead, It's the beginning and end of a company's financial records within 12 months. In the agricultural business, for example, most business year end in autumn because the market is seasonal.

3). Assets

I bet physical property (tangible assets) is what comes to mind when most people hear the word assets. But assets are also intangible such as trademark, copyright, brand name, and patent right. So asset is a term used in accounting to represent the value of ownership that has monetary value. Or it can refer to anything valuable that can be converted to cash. As an entrepreneur, anything you can do to make it liquid is an asset. Hence you can own a tangible asset or an intangible asset.

4). Liabilities

Liabilities are quite the direct opposite of an asset. While the asset are valuable items that increase your company value and equity, liabilities are items that can reduce the equity value of your company. They're a company's financial obligation. In simple terms, asset adds cash while liabilities removed cash. Examples of liabilities are salaries owed, Bank debt, Mortgage debt, Money owed to suppliers (accounts payable), Wages owed, Taxes owed, and rent.

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5). Revenue

Revenue is the money a company makes by selling goods and services. Other sources of revenue are license fees, royalties, interest, and company shares.

6). Expenses

Every company has planned or unforeseen expenses. These are costs that the company incurs to generate more income.

7). Accounts receivable

As the name suggests, this is money that customers owe to the business after the service has been provided.

8. Working capital

You need money to run a business. Working capital is calculated as the current asset minus the current liabilities. If the company's current asset is less than the liabilities, then it has a working capital deficit.

9). Inventory

This financial term used to classify the assets a company has bought to sell to its customers, which have not yet been sold. When these items are sold to customers, then the inventory account decreases.

10). Credit

A credit is an increase in a liability or equity account or a decrease in an asset or expense account.

11). Debit

Debit refers to an increase in an asset or expense account or a decrease in a liability or equity account.

There you have it, eleven common accounting terms with their meaning. Knowing these terms would further enhance your understanding of accounting.

Jennifer Billington

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