Accounting Terminology for Business Employees
The accounting terminologies for business employees are the terms used to describe the accounting processes and procedures that they use daily. These accounting terminologies can be confusing, especially if you do not understand them or have never heard of them before. In this article, Alexander Djerassi discusses accounting terminologies for business employees.
What is Accounting?
The term “accounting” refers to the process of recording financial transactions to measure a company’s performance over time. Management then uses this information to decide how much money to spend on marketing, advertising, research, development, etc.
A resource owned by an individual or organization has value to someone else. For example, your car, house, or computer may be considered assets. In addition, some businesses own real estate and other tangible property.
2. Balance Sheet
A balance sheet is a term used to describe the total amount of all of a company’s assets and liabilities at a particular point in time. It also shows what the company owns (assets) and owes (liabilities).
3. Cash Flow Statement
A cash flow statement is a report that shows the cash inflows and outflows from a company during a specific period.
4. Cost Center
Cost center refers to the department where most of the expenses occur. For example, the cost center for sales would include salaries, commissions, rent, office supplies, etc.
5. Debit Card
A debit card is a plastic card with magnetic strips that stores account numbers, expiration dates, and amounts authorized for payment.
Depreciation is the reduction in the value of an asset because it is being used. For example, when you buy a new home, you pay more than the actual price of the land and building materials. You also pay extra for the right to live there. When you sell the home after living there for ten years, you receive less than the original purchase price. Over time, depreciation reduces the value of the asset.
Capital is any form of investment that provides income in return. Examples include stocks, bonds, mutual funds, bank accounts, and certificates of deposit.
8. Credit Card
A credit card is a debit card that allows customers to charge purchases against their credit limit rather than using cash.
Liabilities are debts owed by a company. Companies often borrow money from banks or investors to finance their operations. If a company does not repay these loans, the lenders will demand repayment.
Expenses are costs incurred by a company charged directly to its operating budget. They are typically paid for through salary payments, travel reimbursements, and other types of employee benefits.
13. Interest Rate
Interest rate is the percentage of interest that a borrower pays on borrowed money. The higher the interest rate, the greater the risk associated with lending money.
14. Income Statement
The income statement shows the revenues earned by a business and the expenses incurred to generate those revenues.
15.Net Profit Margin
Net profit margin is calculated by subtracting the total expenses from the total revenues. This number represents the profitability of a company.
16. Operating Budget
The operating budget represents how much revenue a company expects to earn over a certain period.
In conclusion, according to Alexander Djerassi, accounting terminologies for business owners can be essential tools to help them understand financial statements and how they work. This article discussed some of the terms used in accounting terminology. We hope you enjoyed learning about these terms!