As a small business owner with an accountant handling your finances, taxes, and bookkeeping concerns, you may think you don't need to understand anything about accounting, that is his/her job. However, think about this for a minute. Even though your job is to run your business, you still understand the basics of sales, marketing, product info and customer service, right? So why would you not know at least the basics of accounting, which involves the bottom line, your money.
As they say, knowledge is power, so to help you understand at least basic accounting terms, below is a YouTube video from Brian Routh, The Accounting Dr.
If you would rather read about basic accounting terms rather than watch a video, the following article from QuickBooks Intuit blog offers 24 accounting terms small business owners need to know: (Below is an excerpt. You can read the full article here.
24 ACCOUNTING TERMS EVERY BUSINESS OWNER NEEDS TO KNOW
It seems that every industry has its own special jargon, a secret language of acronyms and buzzwords that make little sense to anyone from the “outside” world. When running a small business, you must wear many hats, a few of which require you to navigate the intricacies of different industries and, as a result, their quirky vocabulary. Unfortunately, in these cases, jargon can often be a huge stumbling block.
To give you a hand, below are 24 terms from the accounting world that every business owner should know.
1. Accounts Receivable
Accounts receivable includes money owed by customers to another company or individual as payment for goods and/or services. It is considered an asset on a company’s balance sheet, because there is an understanding that the clients are legally obligated to pay this amount.
2. Accruals
This is a list of expenses that have been incurred but are not yet paid, or a list of sales that have been completed but not yet billed. Accruals relate to items that will hit your books imminently, either in the positive or negative, but haven’t yet, normally due to the time it takes to complete accounting processes.
3. Accrual Basis Accounting
The accrual accounting method allows for some flexibility when expenses and income are recognized. In this method, companies report when income is earned and when expenses are incurred. There are rules that dictate when income is and isn't recognized for the reporting period, as well as best practices for dealing with bad debt expenses.
4. Assets
Assets are everything that a company owns. In most cases, accounting assets are tangible assets, such as equipment, property, land, cash and tools. But intangible assets, such as stock, copyrights, patents and trademarks, can also fall under this category.
Read the rest of the article on the Intuit Blog.
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