Basic Accounting Terms

Assets: Things that a business owns that have value, like cash, inventory, equipment, and buildings.

Capital: Capital in business is the money and assets a company uses to start, operate, and grow its operations.

Liabilities: Debts or obligations that a business owes to others, such as loans, accounts payable, and mortgages.


Equity: The portion of the company's assets that belongs to its owners, often calculated as assets minus liabilities.



Revenue: The money a business earns from selling its products or services.


Income Statement: A financial statement that shows a company's revenues, expenses, and profit or loss over a specific period of time, usually a month, quarter, or year.


Balance Sheet: A financial statement that provides a snapshot of a company's financial position at a specific point in time, showing its assets, liabilities, and equity.


Cash Flow: The movement of money into and out of a business, showing how cash is generated and used.


Accounts Receivable: Money owed to a company by its customers for goods or services they have received but not yet paid for.


Accounts Payable: Money owed by a company to its suppliers or creditors for goods or services that have been received but not yet paid for.


Depreciation: The decrease in value of assets over time, reflecting wear and tear, obsolescence, or other factors.


Inventory: The goods and materials that a business holds for the purpose of resale or production.

Profit: The amount of money a business earns after subtracting its expenses from its revenues.


Loss: The amount of money a business loses when its expenses exceed its revenues.


Trial Balance: A list of all the accounts in the general ledger with their balances to ensure that debits equal credits.






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