What are important terms in accounting?

Here are some important accounting terms that can help you better understand the basic concepts and processes:

1. Assets:

• A company’s property that provides economic benefits, such as cash, receivables, inventories and fixed assets.

2. Liabilities:

• liabilities and equity of a company. Liabilities show how assets have been financed, either by debt (borrowed capital) or equity (capital from owners).

3. Balance sheet:

• An overview of a company’s financial position at a specific point in time. It shows the assets and liabilities and must always be in balance (assets = liabilities).

4. Profit and loss statement (P&L):

• A financial report that summarises a company’s income and expenses over a given period of time in order to determine the profit or loss.

5. Posting record:

• An instruction for recording a business transaction that indicates which accounts are to be debited and which are to be credited.

6. Account:

• A systematic record of transactions that belongs to a particular category of assets, liabilities or equity. There are asset accounts, liability accounts and revenue accounts.

7. Debit and credit:

• Terms used in double-entry bookkeeping. Debit refers to the left side of an account, while credit refers to the right side. Every entry always has a debit and credit amount.

8. Double-entry bookkeeping:

• An accounting system in which each business transaction is recorded in at least two accounts. This increases the accuracy and transparency of the accounting.

9. Document:

• A document that provides evidence of a business transaction, such as an invoice, receipt or bank statement. Documents are the basis for accounting.

10. Accounts receivable:

• Amounts that the company is to receive from its customers. Trade receivables are receivables resulting from the sale of goods or services.

11. Liabilities:

• The company’s obligations to third parties, such as creditors, suppliers or banks. Trade payables are debts arising from the purchase of goods or services.

12. Equity capital:

• The part of the capital that belongs to the owners of the company and that consists of the owners’ contributions and retained profits.

13. Annual financial statements:

• A summary report on the financial position and performance of a company at the end of a financial year, consisting of a balance sheet, profit and loss statement and notes.

14. Tax balance sheet:

• A balance sheet that takes tax regulations into account and is geared towards the taxation of the company.

15. Cost accounting:

• A branch of accounting that deals with the recording and evaluation of a company’s costs. It is used for planning, controlling and managing costs.

16. Cash flow:

• The liquidity movements of a company over a certain period of time. The cash flow indicates how much money flows into and out of the company.

17. Provisions:

• Liabilities created for future payments or losses, the amount and timing of which are still uncertain.

18. Accruals:

• Postings made to allocate income and expenses to the correct financial year, even if the payment is made at a later date (e.g. prepaid expenses and deferred income).

19. Fixed assets:

• Assets that remain in the company in the long term, such as land, buildings, machinery and vehicles.

20. Value added tax:

• A tax levied on the sale of goods and services. Companies have to pay this tax to the tax office, but they can also collect it from their customers.

These terms form the basis for understanding accounting and its processes. They are crucial for the correct recording and evaluation of financial data in a company.