Business has its own language, just like any other career field. Knowing this language is crucial for every entrepreneur because information in business is communicated using certain essential financial accounting terms. As a business owner, it is important to familiarize yourself with these terms, especially as someone new to the business industry. They might seem intimidating at first, but when you get used to them, you will understand why you needed to know them.
Balance Sheet – A quantitative summary of a company’s financial condition at a specific point in time, including assets, liabilities and net worth.
Assets – Rights or other access to future economic benefits controlled by an entity as a result of past transactions or events.
Expense – Any cost of doing business resulting from revenue-generating activities.
Revenue – The total amount of money received by the company for goods sold or services provided during a certain time period. It also includes all net sales, exchange of assets; interest and any other increase in owner’s equity and is calculated before any expenses are subtracted.
Coupon – Rate of interest payable on a loan.
Enterprise – a business activity or a commercial project.
Equity – A description applied to the ordinary share capital of an entity.
Gross – Before making deductions.
Net – After making deductions.
Liabilities – Obligations of an entity to transfer economic benefits as a result of past transactions or events.
Liquidity – The extent to which a business has access to cash or items which can readily be exchanged for cash.
Profit – Calculated as revenue minus expenses.
Turnover – The sales of a business or other form of revenue from operations of the business.
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