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Common Accounting Terms and What They Mean

Regardless of whether you plan to do your own bookkeeping or not, having a basic understanding of simple accounting terminology is something all small business owners should know.

We have complied a list of some common accounting term and what they mean:

  • Balance Sheet: This gives a glimpse into how the business is doing financially. It shows what the business owns (assets) and what it owes (liabilities).

  • Cash flow: In essence cash flow is the amount of cash flowing in and out of the business over a period of time.

  • Assets: An asset is anything owned by the business that can be converted into cash.

  • General ledger: The general ledger is where all business financial transactions are documented.

  • Return on investment (ROI): The ROI measures how profitable an investment is. ROI is calculated by dividing the net profit by the cost of the investment.

  • Net income: For a business, net income measures total revenue. Net income is determined by subtracting total expenses from total revenues.

  • Cost of goods sold: This is the cost associated with producing the goods sold by a business.

  • Revenue: Revenue is the income a business earns from providing goods or services.

  • Receipts: Receipts is the total sum of cash received by a business for all the transactions over the course of an accounting period.

  • Accounts Receivable: Accounts receivable is the amount of money owed to a business, by its clients for goods and services it provides.

  • Accounts Payable: The amount of money a business owes its suppliers, in exchange for goods and services they provide.

Learning a few common accounting terms will help any business to have a better grasp on the financial state of their business. Call Raleigh Booking today, to help improve how you run your business. Our team is dedicated to small business owners and helping them grow. We specialize in helping businesses to improve margins and cut cost!

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