20 Accounting Terms You Should Know

[Monirul Islam]

Whether you are a current business professional or a prospective student who is considering a career in accounting or business, there are some accounting terms that you need to know. Because accounting is such an essential part of any business, it is a good idea to have an understanding of the basic terminology so that you can discuss finances with accountants. Knowing these terms is even more important if you are planning on a career in accounting; having an understanding of accounting language can help you get a head start in your degree program.  You will encounter these words and phrases frequently when you complete an accounting degree online like the one offered by Brescia University. To help you get started with the financial side of business studies, we've put together a list of the top accounting terms you should know.

Accounting Terminology
Accounting is the general term that refers to the overall process of tracking your business' income and expenses. Accountants then use this data in a variety of calculations and formulas to investigate and evaluate specific information about the financial and tax status of a business.
Bookkeeping refers to the task of recording the amount, date and all sources of business revenues and expenses. Because accurate accounting requires bookkeeping data, it is the starting point of the accounting process.
Invoices are written records of transactions. They are often submitted to a customer or client when requesting payment for goods or services. Invoices are sometimes called bills or statements.
Ledgers are collections of related financial information such as expenditures, accounts receivable, revenues and accounts payable. Once kept on paper in "books," ledgers are now updated electronically.
Accounts are collections of financial information grouped according to customer or purpose. A written record of an account is called a statement.
Accounts payable refers to monetary amounts owed by a business. These can include utilities, consulting fees or office space rental.
Accounts receivable refers to the amounts that are owed to a business and that are expected to be received. This includes sales made on credit.
Bad debt is money owed for a business debt that cannot be collected. It is instead deducted as an operating expense.
Statements are formal written summaries of outstanding (unpaid) invoices. Statements are different from invoices because they are not usually used as a request for payment, but instead are reminders to customers or clients that a payment is due.
Balance sheets are statements of the company's financial position in terms of assets, liabilities and ownership equity for a specific period of time. Basic accounting rules state that a company's net worth must be equal to the assets minus the liabilities.
Depreciation is the method used to systematically transfer the cost of an asset from the balance sheet to the income statement over the course of the asset's usage.
Contingency is a potential liability that exists due to circumstances that may cause a business loss in the future depending on other events that have yet to happen (such as a lawsuit) or may not ever happen.
Equity is the claim that shareholders of a corporation have to a company's net assets.
Tax credit is an amount that is subtracted from the final amount of taxes owed to the IRS.
Deductions are certain expenses related to the cost of operating a business that can be subtracted at tax time. Tax deductions reduce the amount of taxable income.
Assets are any substantial items owned by a business that are expected to last several years. This can include office furniture, computers or company cars.
Liability refers to any obligation that a business has from prior transactions. In accounting specifically, liabilities are assigned a monetary value and businesses are responsible for repayment of that amount in the future.
Revenue is the income received by a business through normal business activities such as the sale of goods and services to customers. Some businesses also receive revenue from royalties, dividends or interest paid to them. Revenue can also refer to a dollar amount that was received by a business during a specific time period.
Net income is sometimes referred to as "earnings," "net profit" or the "bottom line." It refers to the amount that remains after a company subtracts all business expenses from earnings.
Receipts are written records of transactions. Buyers receive receipts to show that items were paid for. The seller keeps a copy of a receipt to show that payment was received. Receipts are sometimes referred to as sales slips.

Source: http://online.brescia.edu/business-news/20-accounting-terms-know/