Glossary: Basic Accounting Principles You Need to Know

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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DISCLAIMER: Please consult with your accountant, attorney and financial advisor before implementing any tips displayed on this website. DIY research does not replace the advice of a licensed professional who has thoroughly reviewed your file.