From balance sheets to income statements, there’s no denying that there are new terms and phrases you’ll come across. In practice, they’re quite easy to understand once the terms are broken down into much simpler definitions.
Although we can’t possibly list them all here, here are five of the most popular bookkeeping terms you should understand.
- Balance Sheet: A report which breaks down your business’ financial situation. It includes the assets, liabilities and the capital of the business. Its purpose is to help show what your business owes and owns.
- Chart of Accounts: A full list of accounts used in your business to categorise financial transactions. This can include assets, liabilities, equity, income and more.
- Expense: This is the fixed, variable, accrued or day-to-day costs that a business may incur through its operations.
- Trial Balance: A business document where all ledgers are compiled into debit and credit columns. This is to make sure a company’s bookkeeping system is mathematically correct.
- Profit and Loss: A financial report which shows the revenue and expenses over a period of time.
This is just scratching the surface. There are plenty of additional terms and phrases that will help you get started. Source
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