Glossary: Basic Accounting Principles You Need to Know

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Get to know the lingo for basic accounting principles used by accountants, bookkeepers, bankers and financial advisors, so you can be on the same page.


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Glossary of Accounting Terms

basic definitions

Assets

: items of value a company can liquidate to satisfy debts, provide a return to owners/shareholders, or generate income (includes cash as well as tangible and intangible items).

Liabilities (Accounts Payable; A/P)

: debts and obligations due and payable now or in the future.

Equity

: the balance left over after deducting total liabilities from total assets.

Balance Sheet (B/S)

: summarizes a company’s assets, liabilities, and shareholder’s equity at a specific point in time.

Profit & Loss Statement (P&L)

: shows how much money a company has made and spent during a specified period.

TIP: You can generate B/S and P&L reports inside your bookkeeping software.


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