Important Accounting Terms used in the Business

Accounting is the foundation for every business. Even though a business man has the skill to manage his employees, the vendors and all other administration work, he needs an accountant to maintain his transactions properly. He wants to sit with them and sort out if there is any issue. If he finds the expenses is less than the income, he can continue with the same business or else he has to close down. Also there are chances for them to identify the unnecessary expenditure and they can avoid that. Hence it is evident that accounting is more important task for every business. So Entrepreneur has to be aware of the important terms in accounting and the meaning of the same. Bookkeeping: Bookkeeping is a wonderful practice of recording all the details about the financial transaction took place. It includes the date, the amount and the source of that expenses or the income. It could be any kind of transaction but it should be recorded in a proper way. Though bookkeeping is a vast task, it helps you to get all the information about the transaction happened even 15 years back. These days, we have many available resources to execute the bookkeeping tasks using various software. Outsourcing companies could also help you with professional bookkeeping. Invoice: Invoice is a record of transaction. It used to be submitted to the clients for the product they bought or the services they availed. In receipt of the raised invoice the buyer would start the process of payment. It is also called as bills. Ledger: Ledger is a collection of details about the complete transaction have taken place. It contains revenues, expenditure, accounts payable and accounts receivable. Ledgers used to be kept as written books. It will be recorded on the lined note books. But these days, we have new techniques and all the transactions can be stored on the computer using accounting software. Statement: It is a summary of unpaid invoices and paid invoices. It is entirely different from invoice where in we request our clients to make the payment. It is a document that states what are all the payments have been made and the payment has to be made. Receipt: Receipt is the token of acknowledgment that a buyer gets after he made the payment. Now the seller keeps the copy of the receipt to show they have received the amount from the buyer. It is also called as Sales slips. Balance Sheet: Balance sheet is a financial document that contains the business assets, liabilities and net worth or equity. Equity is the difference between the value of the assets and the liabilities. Accounts payable: Accounts payable are the amounts that your company needs to pay. For example, the unpaid utility bills and the purchases your business made on credit basis are included under the accounts payable. Accounts Receivable: It is just opposite to accounts payable. It is the payment that the company is expecting from their client or vendors for the services they provide. Sometimes the sales would have been made on credit card. These are the amount which comes under accounts receivable. Bad Debt: Bad debt is the money that cannot be collected due to many reasons. It can be deducted as on operating costs. Double entry accounting: Double entry accounting is a system that records business transaction twice. Ultimately business owners need to know what is accounting and the important terms in accounting.