Accounting can be a confusing subject for many people, including students and small business owners. Part of this confusion is due to the accounts used in accounting and how they relate.
Accounting accounts can be broken down into one of three categories. These categories are assets, liabilities, and equity.
Asset accounts can be broken into current and fixed assets.
Current assets include accounts such as cash, checking accounts, investment accounts, and certificates of [...]
An income statement offers an overview of a specific business' profits and losses over a set period of time, such as a year, month or quarter. Income statements basically summarize every expense and source of revenue of your business.
How Can an Entrepreneur Use An Income Statement?
An income statement is used by business owners to track the profitability of their enterprise over a set period of time. Budgeting is a key aspect, and entrepreneurs can easily see where money can be allocated [...]
Liquidity or solvency ratios indicate whether or not a company is able to pay its short-term financial obligations.
Financial ratios are much more than just a bunch of numbers thrown into a formula. Quite the contrary, analysts use financial ratios to deduce meaningful relationships between certain values reported on companies’ financial statements.
One set of ratios, that is, internal liquidity ratios, evaluates a company’s short term liabilities, such as accounts payable and [...]
If you are beginner to accounting than you should absolutely read, learn and memorize these basic accounting terms I'm going to outline below.
The list includes basic accounting terms that are used very commonly while studying financial accounting.
1. Balance sheet (BS)
The balance sheet is one of the major financial statements that illustrates the assets, liabilities and equity of a company at a given point in time.
This 3 items give investors and bankers an idea about what the [...]