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Glossary Of Terms Common to Small Business - « back to Articles

Account Balance
The difference between the debits and the credits on the General Ledger accounts.

Accounting Equation
Assets = Liabilities + Owner Equity

Accounts Receivable
An asset account representing amounts due from customers.

Accounts Payable
A liability account, representing amounts owing to creditors (other than banks) for the purchase of goods or services on credit.

Accumulated Depreciation
The total of the expired costs of any one asset.

Allowance for Bad Debts
A contra account, contains the estimate of the accounts receivable that are expected to become un-collectable during a fiscal period.

Assets
What a business owns.

Bad Debits Expense
The cost of granting credit to a customer who does not pay their bill, an un-collectible accounts receivable.

Balance Sheet
A financial statement reporting assets, liabilities and owner's equity at a certain date.

Capital
The owner's claim against the assets through personal investment and accumulated net profits, losses and draws.

Chart of Accounts
A numbering plan, listing all account titles in the order in which they appear in the accounting equation.

Contra Account
An account which is in opposition to another, that reduces the book value of assets, such as Allowance for Bad Debits.

Corporation
A form of business which operates under a government charter and usual consists of three or more people, called shareholders.

Cost of Goods Sold
The expense of the goods sold, or the cost of goods used up (expired cost).

Crediting
Recording an amount on the right side of the account.

Current Assets
Assets expected to be converted into cash within one year of the balance sheet.

Current Earnings
The Net Income on the Income Statement for the business year to date.

Current Liabilities
Debts owing which fall due within one year of the balance sheet date.

Debiting
Record an amount on the left side of the account.

Depreciation
The process of allocating the cost of a fixed asset over its estimated useful life.

Depreciation Expense
The expired cost of using a fixed asset.

Drawings
A decrease to owner's equity resulting from the owner's withdrawal of assets for personal use or personal income.

Expenses
The costs incurred by a business in earning revenue.

Fixed Assets
Assets which are kept to assist the revenue making activities for more than one year beyond the balance sheet date.

General Journal
A two column journal, where transactions have been recorded as debits and credits.

GST - Goods and Services Tax.
A credit balance in this account would indicate a remittance to the government, while a debit balance would indicate a refund owed the business.

Income Statement
A financial report of the results of matching revenues with related expenses for a definite accounting period (a month or a year).

Ledger
A group of accounts.

Liabilities
The claims of creditors against the assets of a business.

Long Term Liabilities
Debts which, in the ordinary course of business, will not be paid within one year of the balance sheet date.

Net Loss
The excess of expenses over revenues.

Net Income
The excess of revenues over expenses.

Opening Entry
The entry that results in the opening of a set of books for a business.

Owner Equity
The claim of the owner against the assets of the business.

Partnership
A form of proprietorship in which there is more than one owner of the business.

Proprietorship
A form of business organization in which the owner and the company are not legally separate, but keep separate accounting records.

PST - Provincial Sales Tax
Tax collected on the sale or rental of all goods (except those exempted) which must be remitted to the province on a regular basis.

Retained Earnings
The accumulated total of after-tax profits and losses over the life of a corporation. Any dividends paid are also subtracted from retained earnings.

Revenue
An inflow of cash and accounts receivable to a business resulting from the sales of goods and services.

Rule For Decreasing All Accounts
A decrease in an account is recorded on the side opposite to that on which the account is placed on the Balance Sheet.

Rule For Increasing All Accounts

An increase in an account is recorded on the side on which the account is placed on the Balance Sheet.

Synoptic Journal
A multi-column journal that allows the accumulation of several entries in often used accounts.

Trial Balance
A list or summary of the balances of accounts in a ledger as at a certain date, where total debits equal total credits.



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