Basic accounting Terminologies | Corporate Accounting basic Terms

Entering into the accounting field can be a little confusing at first with all of the new terminology to learn. Don’t feel left out in conversations and don’t be left behind because you aren’t sure what someone is talking about. Check out the accounting terms in this video and find out what that last conversation was about. Learn these terms before starting your first big job and you will WOW your employer. Learn these terms before your accounting classes start and you will definitely be a step ahead of everyone else in your classes.

Accounting Equation – The Accounting Equation is Assets = Liabilities + Equity. With accurate financial records, the equation balances.
Accounting – Accounting keeps track of the financial records of a business. In addition to recording financial transactions, it involves reporting, analyzing and summarizing information.
Accounts Payable – Accounts Payable are liabilities of a business and represent money owed to others.
Invoice – An Invoice shows the amount of money owed for goods or services received.
In The Black – Makes reference to a profit on the books; opposite of “in the red.” Black Friday sales are known for the profit retailers are adding to their books.
In The Red – Makes reference to a loss on the books; opposite of “in the black.” In the days of handwritten accounting, ledger entries written in black meant there was a profit, but those in red meant there was a loss.
Job Costing – Job Costing tracks costs of a particular job against its revenues.
Journal – The first place financial transactions are entered. They are entered chronologically.
Liability – Liabilities are the obligations of an entity, usually financial in nature.
Liquid Asset – Consist of cash and other assets that can be easily converted to cash.
Loan – A monetary advance from a lender to a borrower.
Master Account – A Master Account has subsidiary accounts. Accounts Receivable could be a master account for various individual receivable accounts.
Net Income – Net Income equals revenue minus expenses, taxes, depreciation and interest.
Non-Cash Expense – Does not require cash outlay, e.g. – depreciation.
Non-operating Income – Income not generated from the business. An example might be the sale of unused equipment.
Note – A Note is a document promising to repay a debt.
Operating Income – Determined by subtracting operating expenses from operating revenue. Interest and income tax expenses are not included.
Other Income – Non-recurring income, e.g. – interest.
Payroll – An account listing employees and any wages and salaries due them.
Posting – Refers to the recording of ledger entries.
Profit – Profit is revenue minus expenses. Reductions for taxes, interest, and depreciation are included.
Profit/Loss Statement – A financial report issued by a company on a regular basis that discloses earnings, expenses and net profit for a given time period.
Reconciliation – The act of proving an account balances; debits and credits equal. An example of reconciling an account is to verify that the bank statement matches the checkbook balance, making allowances for outstanding checks and deposits.
Retained Earnings – Money left after all the bills have been paid and all the shareholder dividends have been distributed; often reinvested in the business.
Revenue – The actual amount of money a company brings in during a particular time period; gross income.
Shareholder Equity – A company’s total assets less its total liabilities; owner’s equity; net worth. Shareholder equity comes from the start-up capital of the business plus retained earnings amassed over time.
Single-Entry Bookkeeping – An accounting process that uses on one entry, instead of debit and credit entries. Small businesses using cash accounting system benefit from the ease of this system, which is much like keeping a checkbook.


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I would like to thanks Professor Alldredge for giving such a nice explanation of these Accounting Terminologies.

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