ACCOUNTING TERMINOLOGY - PART 1 For the general public, accounting jargon is extremely confusing and downright frustrating. If you don’t know your assets from your equity read on for a simplification of common accounting terms in the following four articles.
Accounts - All businesses big and small have to engage in a variety of transactions that involve buying and selling. Such activities cause your liabilities, equity and assets to fluctuate. Failure to record all of this will cause confusion in your company’s finances and could get you in trouble with the inland revenue. In order to avoid this, you must enter all transactions in accounts. It is necessary to create several different accounts including ones for all purchases and others for all sales and income.
Accounts Payable - Otherwise known as A/P these are accounts that record the amount of money you spend on goods and services. On a balance sheet, these entries will be found in the liability section.
Accounts Receivable - These are simply accounts that record the amount of money you are owed from sales generated by the company. It is also known in the accounting world as A/R and will be found in a balance sheet’s current assets section.
Assets - In the very simplest terms, these are what a company owns. Every single thing involved in and owned by your business that has value constitutes an asset. These could be property, land or office equipment. In the world of accounting, assets are divided into fixed and current. Fixed assets are usually items essential to the company that will not be sold. An example of this would be a company’s office building. Current assets are items which could feasibly be turned into cash
quickly should the need arise. Examples of this include vehicles and land as well as any outdated equipment that perhaps needs to be sold. For more information you can contact chartered accountants North London.