| Accounting
Terminology
Accounts Payable - How much
you owe your vendors and suppliers. Accounts payable increase when you receive
an invoice or a bill and are recorded as an expense or purchase. Accounts
payable decrease as you pay your bills. If you pay at the time of the purchase,
there are no accounts payable.
Accounts Payable Ageing - A
schedule in detail or summary of payables owed with date range columns to group
the liabilities by age.
Accounts Receivable - How
much your customers owe you. Accounts receivable increase when an invoice or a
bill is created by a sale to a customer. Accounts receivable decrease as your
customers pay you. If customers pay at the time of the sale, there are no
accounts receivable.
Accounts Receivable Ageing
- A schedule in detail or summary of receivables due you with date range columns
to group the assets by age.
Accrual Basis - An
accounting method that records transactions when they happen even if no money
changes hands. The use of accounts payable, accounts receivable and inventory is
accrual basis.
Balance Sheet - The value
of assets, liabilities and owner's equity at specific point in time.
Bank Reconciliation - The
process of figuring out why what you think the bank balance is and what the bank
say it is are not the same, Generally it is adding and subtracting transactions
that you don't know about (bank fees) and transactions that the bank hasn't
received yet (outstanding checks). It is an important procedure to safeguard
your money and find any mistakes in your balance or a bank error.
Basis - The value of an
asset, liability or equity computed using accounting principles or tax
regulations. An item may have a different value for accounting and tax.
Cash Basis - Transactions
are only reported when money changes hands, customer pays you or you pay
someone. The cash basis of accounting does not have accounts receivable,
accounts payable or inventory. True cash basis is not common.
Cash Disbursements -
Spending money; easy to do, hard to control. Cash disbursements include payment
of accounts payable and other payments not applied to accounts payable.
Cash Receipts - Money
received, either from sales or other sources.
Credit - Generally an
increase to liabilities and equity or a decrease to assets on the balance sheet
and an increase to income or a decrease to costs and expenses on the income
statement. Debit -
Generally an increase to assets or a decrease to liabilities and equity on the
balance sheet and an increase to costs and expenses or a decrease to income on
the income statement. Debits and Credits
- Debits result in good things on the balance sheet and bad things on the income
statement. Credits are the opposite, resulting in bad things on the balance
sheet and good things on the income statement. Debits increase assets like cash,
receivables and equipment. Debits decrease liabilities like payables and long
term debt. Debits increase costs and expenses or reduce revenue on the income
statement. Credits reduce assets and increase liabilities on the balance sheet.
On the income statement, credits increase revenue or decrease expenses. Depreciation
- The process of spreading the cost of fixed assets over the
assets estimated useful life. The theory is to match revenue with expense. Double Entry
- Every transaction is recorded with a debit and a credit that are equal. The
debit and the credit may be divided and posted to more than one general
ledger account. With accounting software, many transactions only require the
entry of one amount but equal debits and credits are recorded automatically. . This
an on going project, more will be added. If you think there is an inaccuracy or
clarification is necessary contact me
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