Financial Accounting/Terminology

Introduction

Part of learning a new profession is learning the jargon associated with it. Accounting is not unique in this regard. In this course, and in practice, there are many terms that are used that the listener is expected to know. The following is a list of some of the more common lingo that will get you by with basic bookkeeping and provide a foundation for future accounting concepts. You can always use your favorite search engine to find any definitions we have not covered here.

Basic Terminology

We will go over some of the basic terms that you will start seeing right away and that you need to be familiar with. As the sessions and courses progress, new terms will be introduced and defined at that time. As we get into intermediate and advanced accounting, some of the terms below can be defined even further (e.g. asset).

Asset - something that is owned that can be converted into cash (or is cash) or for the purpose of operations. Examples: cash, accounts receivable, land, truck.
Accounts receivable - represents amounts owing from customers for products delivered or services rendered.
Liability - represents obligations to others for products delivered, services rendered or monies loaned.
Accounts payable - represents amounts owing to suppliers for products delivered or services rendered.
Equity - what is left over after what you owe (liabilities) is subtracted from what you own (assets). Essentially the owner's residual interest in the company.

Basic Accounting Formula

Assets=Liabilities+Equity

Hint: Foundation to everything in accounting know it backwards forwards and side to side.

Liabilities=Assets-Equity

Assets-Liabilities=Equity

Problems