Unit-1 Basic Accounting Terminology-Business Accounting| BBA 1st Year

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Basic Terminologyic Accounting 

1. Account Receivable (AR)

• Definition of Accounts Receivable (AR): The amount of money owed to a business by customers or clients following the delivery and/or use of goods or services.

2. Accounting (ACCG)

• Accounting (ACCG) Definition: A systematic way of recording and reporting financial transactions for a business or organization.

3. Accounts Payable (AP)

• Definition of Accounts Payable (AP): Funds owed by a company to creditors (suppliers, etc.) in exchange for goods and/or services delivered.

4. Asset (Fixed Current) And (FA, CA)

• Assets (Fixed and Current) Definition: Current assets (CA) are those which will be converted into cash within a year. Typically, this could be cash, inventory, or accounts receivable. Fixed assets (FA) are long-term and will likely provide a company with benefits for more than one year, such as real estate, land or major machinery.

5. Asset Class

• Definition of asset class: An asset class is a group of securities that behave similarly in the market. The three main asset classes are equities or stocks, fixed income or bonds, and cash equivalents or money market instruments.

6. Balance Sheet (BS)

• Balance Sheet (BS) Definition: A financial report that summarizes a company’s assets (what it owns), liabilities (what it owes), and owner or shareholder equity at a given point in time.

7. Capital (CAP)

• Capital (CAP) Definition: A financial asset or the value of a financial asset, such as cash or goods. Working capital is calculated by subtracting your current assets from current liabilities – basically money or assets that an organization can put to work.

8. Cash Flow (CF)

• Cash Flow (CF) Definition: Revenue or expenses generated through business activities (sales, manufacturing, etc.) over a period of time.

9. Certified public Accountant (CPA)

• Certified Public Accountant (CPA) Definition: a designation given to One Has passed Examination Accountant who standardized the work experience and educational requirements for CPAs to become a SRA complete and government mandated

10. Cost of Goods Sold (COGS)

• Cost of goods sold (COGS) definition: Direct expenses related to the production of goods sold by a business. The formula for calculating this will depend on what is being produced, but for example it may include the cost of raw materials (parts) and the amount of employee labor used in production.

11. Credit (CR)

• Credit (CR) definition: An accounting entry that can either decrease assets or increase liabilities and equity on a company’s balance sheet, depending on the transaction. When using the double-entry accounting method there will be two recorded entries for each transaction: a credit and a debit.

12. Debit (DR)

• Debit (DR) Definition: An accounting entry where there is either an increase in assets or a decrease in liabilities on a company’s balance sheet.

13. Diversification

• Diversification Definition: The process of allocating or spreading capital investments among different assets to avoid greater exposure to risk.

14. Enrolled Agent (EA)

• Enrolled Agent (EA) Definition: A tax professional who represents taxpayers in cases where they are dealing with the Internal Revenue Service (IRS).

15. Expenses (fixed, Variable, Accrual, Operating) (FE, VE, AE, OE)

• Expenses (FE, VE, AE, OE) Definition: Fixed, variable, accrued or day-to-day costs that a business may incur through its operations.
• Fixed Expenses (FE): Payments such as rent that will occur in a regularly scheduled manner.
• Variable expenses (VE): Expenses, such as labor costs, that may change over a period of time.
• Accrued Expense (AE): An accrued expense that has not yet been paid.
• Operating Expenses (OE): Business expenses that are not directly associated with the production of goods or services – for example, advertising costs, property taxes, or insurance expenses.

16. Equity Equity and owner’s (OE)

• Equity and Owner’s Equity (OE) Definition: In the most general sense, equity is assets minus liabilities. Owner’s equity is typically explained in terms of the percentage of stock an individual has an ownership interest in the company. Owners of stock are known as shareholders.

17. Bankruptcy

• Obligations with creditors when their debts come due.
  

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18. Generally Accepted Accounting Principles (GAAP)

• Generally Accepted Accounting Principles (GAAP) Definition: A set of rules and guidelines developed by the accounting industry for companies to follow when reporting financial data. Adherence to these rules is especially important for all publicly traded companies.

19. General Ledger (GL)

• General ledger (GL) definition: The complete record of financial transactions over the lifetime of a company.

20. Trial Balance

• Trial Balance Definition: A business document in which all ledger accounts are compiled into debit and credit columns to ensure that a company’s bookkeeping system is mathematically correct.

21. Liabilities (Current and Long Term) (CL, LTL)

• Liabilities (Current and Long Term) Definition: A company’s debts or financial obligations incurred during business operations. Current liabilities (CL) are debts that are payable within a year, such as debts owed to suppliers. Long-term liabilities (LTL) are usually payable over a period of more than one year. An example of a long-term liability would be a multi-year mortgage for office space.

22. Limited Company liability (LLC)

• Limited liability company (LLC) Definition: An LLC is a corporate structure where members cannot be held accountable for the debts or liabilities of the company. For example, it can save business owners from losing their entire life savings if someone sues the company.

23.  Net Income (NI)

• Net Income (NI) Definition: A company’s total earnings, also known as net profit. Net income is calculated by subtracting total expenses from total revenue.

24. Present Value (PV)

• Present Value (PV) Definition: The present value of a future amount of money based on a specific rate of return. Present value helps us understand that receiving $100 now is more valuable than receiving $100 a year from now, because the money in hand now has the ability to be invested at a higher rate of return.

25. Profit and Loss Statement (P&L)

• Profit and Loss Statement (P&L) Definition: A financial statement that is used to summarize a company’s performance and financial position by reviewing revenues, costs, and expenses during a specific period, such as quarterly or annually. .

26. Return on Investment (ROI)

• Return on Investment (ROI) Definition: A measure used to evaluate financial performance relative to the amount of money invested. ROI is calculated by dividing the net profit by the cost of investment. The result is often expressed as a percentage.

27. Individual Retirement Account (IRA, Roth IRA)

• Individual Retirement Account (IRA) Definition: IRAs are savings vehicles for retirement. A traditional IRA allows individuals to direct pre-tax dollars toward investments that can be tax-deferred, meaning any capital gains or dividend income is not taxed until the It is not withheld, and, in most cases, it is tax deductible. Roth IRAs are not tax-deductible; However, eligible distributions are tax-free, so as the money grows, withdrawals are not taxed.

28. 401K and Roth 401K

• 401k and Roth 401k Definition: 401K is a savings vehicle that allows an employee to defer part of his or her compensation into an investment-based retirement account. Money deferred is usually not subject to taxes until it is withdrawn; However, an employee with a Roth 401K can make contributions after taxes. Additionally, some employers choose to match contributions made by their employees up to a certain percentage.

29. Subchapter Corporation (S-Corp)

• Subchapter S Corporation (S-CORP) Definition: A form of corporation (which meets specific IRS requirements) and has the advantage of being taxed as a partnership rather than being subject to the “double taxation” of dividend companies. with the public

30. Bonds and Coupons (B&C)

• Bond and Coupon (B&C) Definition: Bond is a form of debt investment and is considered a fixed income security. An investor, whether an individual, company, municipality or government, lends money to an institution with the promise of getting his money back plus interest. The “coupon” is the annual interest rate paid on a bond.

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