The Top 25 Accounting Terms Every Student Should Know

These following 25 phrases are the most important terms used in accounting. Any prospective students thinking of obtaining accounting degrees will need to become familiar with these terms:

Accounting Equation: The most basic accounting equations are Assets = Equities and Assets = Liabilities + Owner's Equity.

Accounts: All accounting systems record the activities of accounts, which summarize increases and decreases in each asset, liability, owner's equity, revenue and expense.

Accounts Payable: Bills that a business owes to the government or suppliers.

Accounts Receivable: The money customers owe for products and services.

Accrual Basis Accounting: Accounting for expenses and sales at the time of transaction.

Assets: Anything of value that a business owns.

Balance Sheet: The financial condition of a company on a specific date.

Cash Flow: The movement and timing of money that comes in and out of the business.

Chart of Accounts: A listing of every account in an accounting system.

Credit: Used in double-entry accounting to increase a liability or an equity account.

Debit: Used in double-entry accounting to increase an asset account.

Direct Costs: Expenses that include labor costs and materials.

Double Entry Accounting: An accounting system that maintains the balance sheet: Assets = Li

abilities + Owner's Equity.

Equity: Funds supplied to a company that show ownership of or claims against the assets.

Expense: Dollars paid out to suppliers, vendors, government, employees, charities, etc.

Financial Statements: Refers to Balance Sheet and Income Statement.

General Ledger: A book listing increases and decreases in all the accounts of a company.

Gross Profit: Money left after subtracting the direct costs from the selling price.

Income Statement: Report that shows changes in equity.

Indirect Cost: Expenses indirectly related to the services provided to customers.

Inventory: Materials purchased with the intent to sell.

Journal: Chronological diary that keeps track of business activities.

Liabilities: Claims against assets by someone other than the owner.

Net Income: Money left after subtracting all expenses from revenues.

Retained Earnings: Amount of net income earned and retained by the business.

So if you are interested in receiving any one of the many accounting degrees available, reviewing these terms used in accounting is a great place to start.

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