Glossary of Accounting terms

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Glossary of Accounting terms

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4. Amortization: It is a strategy used to progressively reduce the value of a loan or an intangible asset over a given period. In other words, it consists of spreading the payments of a loan over a longer period. In accounting, it is included in the category of profit and loss, in the income statement, and is deducted from profits.

3. Active: It is defined as any element or resource of value that has the potential to be transformed into cash. It can generate money for a company or it can benefit from keeping or using it, depending on the circumstances.

2. Account Receivable: They are the amount of money that customers owe a company in exchange for goods and services that the company has provided on credit to the customer. Usually, the company will notify the customer of the amount due by issuing an invoice. Accounts receivable are current assets, which means that the account balance is due within one year.

1. Account Payable: It is an accounting account that records the outstanding debts of a company with its suppliers or creditors. In other words, it represents the money the company owes to third parties for goods or services it has purchased, but has not yet paid.

It has two meanings. One is used to describe an agreement between two parties whereby one of them agrees to provide goods and services to the other. The agreement states that the second party will pay for the goods and services at a later date that has been mutually agreed. For example, an account with a vendor, a credit card, or a loan.

8. Credit:

It is a document that helps track the overall cash flow of the company and determine long-term solvency or ability to pay supplier invoices. In the cash flow statement, the inflow and outflow activity of the company during a specific period is shown.

7. Cash Flow Statement:

Future growth. It's an important part of running an effective business, and it's basically about the money and resources a business needs to manufacture the products or services it sells. Capital is primarily defined as cash or liquid assets held for the purpose of making purchases. Capital can also refer to any business asset with monetary value, such as equipment, real estate, and inventory.

6. Capital:

It is a document that gives an idea of the financial strength of the company and allows to evaluate where the money comes from and where it is going. It is issued monthly, quarterly or annually depending on business requirements and records three elements: assets, liabilities and net worth.

5. Balance Sheet:

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11. Equity: Also known as stockholders' equity, it is one of the top three categories on a company's balance sheet, along with assets and liabilities. It represents the difference between the assets and liabilities of the company and, in simple terms, shows the investment of the owners or shareholders in the business.

10. Depreciation: It is used to record the cost of an asset (business equipment) and its depreciation. It is calculated based on the expected service life. These items are your physical assets: computers, printers, cars, machinery, and so on. They all lose value over time. The loss of value is known as depreciation.

9. Debit: It is an accounting entry that records when a payment is made or due. It is usually posted on the left side of a general ledger account. When a debit is posted to an account, the amount of an asset or liability increases or decreases. Debits correspond to disbursements, additions of assets or decreases in income or obligations, respectively.

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15. Fixed Expense: It is an expense of a company with the same amount each time it is paid. Typically, business owners pay these expenses weekly, monthly, quarterly, or annually. In general, they are easy expenses to include in the budget. These can include mortgage or rent payments, employee wages, car payments, real estate taxes, and insurance costs.

14. Fixed Asset: They are the goods acquired by a company that cannot be converted into cash easily, it usually takes more work to return their cash value to the company. Fixed assets may also be referred to as long-term assets or non-current assets.

13. Financial Statements: They refer to a set of reports that show the financial performance of a company and all business activities related to its management. Accountants use these reports for the purpose of preparing tax reports, and government agencies use them for auditing purposes. This information provides accuracy for tax purposes and allows companies to make investments accordingly or seek financing.

12. Financial Audit: It is a review of a company's financial statements to ensure that records are fair and accurate. Most companies do an annual audit of the financial statements, including the income statement, balance sheet and cash flow statements, to ensure that the finances are current and correct.

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They are the financial accounts of the company, which are then used to create important documents, such as the balance sheet and the income statement. It is an accurate record of all financial transactions and allows for a "balance of sums and balances", which means that the accounting books will be reconciled once completed.

They are the costs associated with purchasing products or services and typically include the names of the seller and customer, as well as details about the product or service, net price, taxes, and gross amount owed. They also indicate a payment deadline. Invoices are legally binding and are used by both parties in financial records

Also known as stocks, it encompasses the raw material that the company uses in production or has for sale. Inventory is one of the main sources of income generation and, as a result, one of the main sources of return for shareholders. A company's inventory can be divided into three core categories: raw material, finished commodities, and work in progress.

They are assets that do not have a physical form and are not easy to identify. These include intellectual property, goodwill and brand awareness. On the other hand, tangible assets can also be land, buildings, machinery, and other types of physical property.

17. Inventory:

18. Invoice:

16. Intangible Assets:

19. Ledger:

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They are the amount of earnings left over after all expenses and costs are deducted from total income. It is a measure of a company's profitability over a given period and can be broken down into several stages. It is the amount of money that the company gets after all operating costs, interest and taxes are also subtracted.

21. Net profit:

Often referred to as net income or net profit, they are a financial metric that represents the amount of money a business generates after deducting all of its operating expenses and costs. In other words, net income is the net income that remains after subtracting all expenses related to the production, operation and financing of the company, including taxes and interest

20. Net Income:

It represents all the financial obligations and debts that a company has at any given time. These obligations can be short-term (current liabilities) or long-term (non-current liabilities). In short, liabilities reflect a company's debts and financial obligations.

22. Passive:

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25. Trial Balance: It is a report that shows the balances of all accounts in a company's general ledger at any given time. It includes important accounting items, such as assets, liabilities, net worth, income, expenses, gains and losses, and its primary purpose is to show the current status of general ledger debits and credits at any given time.

24. Tangible Asset: They are assets that have physical form, that is, that can be touched. They are defined as assets that have a real value and are the most important that a company can have. There are two types of tangible assets: working capital and fixed assets. Examples of tangible assets are land and property, cash, furniture, office supplies, vehicles, and equipment.

23. Share Capital: It is an amount of money that the shareholders or partners of a company contribute to finance its operation and operations. It is an important source of financing that supports the company's activity and is used to acquire assets, cover operating expenses and finance growth projects.

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• Angie Elianie González Juan
• Key: 10
• Fifth Expert Accountant with Computer Orientation "B"
• Course: English
• Theme: Glossary of Accounting terms

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