Terms Used in Accounting

Let us familiarize some common accounting terms below:

Entity:

An Accounting entity is a well-described economic unit that segregates the accounting of definite transactions from other divisions or accounting entities. From the accounting perspective, an accounting entity might be an organizational structure that possesses its own objectives, methods, and records.

Transactions:

The transaction can be considered a business activity that has an economic impact on an organization’s financial statements. In this business activity, the money will be exchanged upon purchase of product, sales, or any form of expense can be stated as a transaction that will also affect the accounting records.

Capital:

In simple terms, we can describe capital as the economic resources invested by the financiers in business that will be utilized for the fund operations. It can be used for spending for daily operations and also for funding its future growth.

Stock:

Stock is a widely used concept for denoting the number of accessible products that are stored in the shop or warehouse ready for sale or distribution.

Goods:

Goods are materialized, manufactured items with constant market demand.

Creditors:

The creditors or receivables can be defined as the individual or company who owe money in a credit relationship. The creditor grants credit to the opposite party to take up money, usually by a loan agreement or contract.

Debtors:

The debtors or payables are the persons or institutions that owe money to their suppliers. This means a debtor is one who borrows money from a creditor.

Liabilities:

Liabilities are the debt of the company. The bank loans, unpaid bills, mortgages, and any other types of money that the company has to pay. There are mainly two types of liabilities, which are Current Liabilities and Non-Current Liabilities.

Current Liabilities are short-term liabilities. The unpaid bills, payroll taxes, accrued expenses, loans, advances, etc. come under this category. The Non-Current Liabilities are long-term liabilities which include long-term loans, long-term lease, deferred tax liabilities, and other aspects.

Assets:

In terms of financial accounting, assets can be defined as any resource possessed by a business or organization. It can be anything that has the potency to generate positive economic value and is used in the long term. The asset can be classified as a Fixed asset or the Current asset. Furniture, vehicles, land, machinery, buildings, and other equipment comes under the fixed assets category.

When we consider Current Assets, it has a crucial role in business which refers to an organization’s short-term liquidity and proficiency to pay its short-term liability. Also, it can be changed quickly. Examples of Current assets are Cash, account receivable, stock inventory, prepaid liabilities, cash equivalents, and many more.

Revenue/Income:

Revenue or income is the aggregate amount of income propagated from product selling or providing services associated with the organization’s primary operations. In short, it is the total earnings or profit of an organization. In accounting, the income demonstrates at the top line of the income statement.

Expenses:

From an accounting perspective, expenses are the operational expenditures that are spent to acquire business revenues. The expenses will be debited from the expense account.

Profit:

Profit is the financial gain, specifically, the difference between the amount gained and the amount spent in procuring, running, or producing something.

Loss:

Loss is the financial expenses encountered by the entity at the time of its revenue generation. The difference between income and expenses demonstrates profit and loss.

Equity:

Equity is the sum of money a proprietor puts into it or owns. The difference between the liabilities and assets in the Company’s balance sheet reveals the actual amount of the company equity.

Bookkeeping:

Equity is the sum of money a proprietor puts into it or owns. The difference between the liabilities and assets in the Company’s balance sheet reveals the actual amount of the company equity.

Stakeholders:

Stakeholders are the persons or groups with constant interest or concern in the entity. We can consider an organization's employees as stakeholders who are interested in the organization’s growth.

Shareholders:

Shareholders are who own a share in an organization. A shareholder will always be a stakeholder, but the stakeholder may not be a shareholder.

Sales:

Sales can be referred to as the trade of goods and services for money.

Purchase:

Purchase can be considered as trade in which we buy goods or assets. Cash purchases or credit purchases are possible.

Ledger:

Accounting Ledger is the account or record used to keep bookkeeping entries or transaction entries for balance sheet and income statement transactions.

Journal:

Journals are the account that keeps all the details of the financial transactions of a business. It can be utilized for the future reconciling of accounts and for the information passing to other accounting records. The five types of journals used in PerfectWORK are sales, purchase, cash, bank, and miscellaneous.

Journal Entries:

Journal entry is a collection of business transaction records in a business's accounting records. It includes the journal items with respect to the transaction comprising reference number, accounting date, and the ledgers impacting the credit and debit side.

By pursuing the new and advanced features, the PerfectWORK Accounting module became a more reliant and comfortable tool for handling the financial management aspects of the business.