For those of us that own businesses or are new to the business world, there is a lot to keep track of in order to be successful. There are many financial decisions that you will be making along the way. All of this has a certain jargon that goes with the territory. If you are new to it all, it can surely be confusing. That’s why Mark Dicus & Company is here to explain some of the basic financial accounting terms and what they mean.
Basic Financial Accounting Terminology
Hopefully, this list of basic terms will prove to be useful if you are new to owning and running your own business.
– Cash Flow: Cash flow refers to any money that is transferred in and out of your business as customers and clients buy or pay you for your services. Sometimes it is referred to positive or negative, and this is just the difference in cash from the beginning of a period to the end.
– Accounts Receivable: There are invoices that describe all the money that is owed by a client. They are outstanding invoices or bills that haven’t been paid yet.
– Accounts Payable: This is the money that a business owes it creditors, or somewhat of a short-term debt. Usually this is money that is owed for goods and services.
– Balance Sheet: This ever important financial statement shows the financial health of any business. Included in a balance sheet are liabilities, assets and the owner’s equity at any specific place in time.
– Assets: The assets of a company include all the resources that are owned by the company and can be measured and expressed in dollars. This includes things like cash, investments, inventory, buildings and vehicles.
– Net Income: Anyone that has a business, is in it to make money. The net income of a business is the residual amount of earnings after the owner deducts all the expenses from sales.
– Cost of Goods Sold (COGS): This is the exact cost that is associated with the goods that a company sells.
– General Ledger: Keeping track of the accounting for a company is a big job. The general ledger is a company’s set of numbered accounts for accounting records.
– Trial Balance: This report lists the balances in each of the company’s general ledger accounts. This is to ensure no mistakes are made.
Accounting, Bookkeeping & More in Menominee Falls, Waukesha, West Allis, Racine & Greater Milwaukee, Wisconsin
Hopefully these short explanations help to shed some light on the many terms that come with the finances in your new business. It can be difficult to know the best way to keep your book organized and ensure your business is prepared for tax season. The experts at Mark Dicus & Company know how stressful it can be when you aren’t totally familiar with the way it all works. We can help you stay organized and keep you prepared as our certified accountants help make your business a success. Call us today!