Accounting has many terms and definitions that all business owners should know to ensure success and a better understanding of managing their cash flow. As many accounting terms were covered previously, Mark Dicus & Company has a few more accounting terms we would like to cover. Continuing on from our previous post, below are some more of the essential account terms that all business owners need to know.
Basic Accounting Terms
Fiscal Year: This is a measured period of time that consists of 365 days, during which the company’s accounting record is processed. A fiscal year can coincide with a full calendar year. However, it can also be a yearly measurement when the business opened up for the first time.
Forecasting: Is a process that uses the company’s historical financial data to predict their future trends and profits. Forecasting often helps estimate future budgets for a certain period of time. These predictions are often based on the company’s previous sales, gross profits, value of current assets and scheduled payments.
General Ledger: Is a complete record of the company’s financial transactions, which is done over the total lifetime of the business, company, or organization. The ledger follows the business owner’s capital, revenues, assets, and expenses. To have an accurate ledger, the company must be diligent in recording all transactions.
Generally Accepted Accounting Principles (GAAP): This refers to all the rules, standards and principles that are done by a certified public accountant(s) that a business uses. Failing to follow proper GAAP guidelines can result in a number of problems for a business.
Journals: Is a reference to the business accounts such as recorded transactions as they occur and before they are processed through the general ledger or official accounting recorders.
Liabilities: Are debts that the business or company owners have yet to pay, including short or long term payments. Some examples of Liabilities are mortgages, credit card balances, and unpaid loans.
Market Value: Is an investors measurement of the what they think the value or worth of the company. Market value is often determined by the company’s past financial documents and what current products or services the company may provide.
Profit & Loss Statements (P&L): Is the reports that list earnings, expenses and net profits for a certain period or block of time. P&L statements are also often referred to as Income Statements.
Revenue: Is the total money amount collected for the goods or services provided by the company and before subtracting any expenses. Revenue can also cover any credit or discounts as well as return products.
Trial Balance: Is more of an exercise used to help confirm final figures before the financial statement is generated. This exercise requires placing debts and credits on a worksheet to create an accurate balance.
Work Capital: Is the amount of money the business or company can spend for necessary items for the business. Work capital helps the owner determine how much money is needed for basic operation expenses.
Accounting Services in Menominee Falls, Waukesha, West Allis, Racine & Greater Milwaukee, Wisconsin
These are the essential accounting terms that every business owner needs to know. However, this is certainly not a complete list. For help for accounting services for your business and more, contact Mark Dicus & Company today.