Fixed Costįixed costs remain constant and not subject to change over a period. When a business sells all assets, equity is the leftover amount shared to shareholders after debt payment. It's called owners equity and alternatively known as stockholders’ equity. EquityĮquity equals assets minus liabilities. According to the IRS, a company can take deductions on some expenses if eligible. A couple of expenses are fixed and remain the same over months. ExpensesĮxpenses are the total cost of running a business. Dividends can be distributed as cash or added to shares of stocks. The profits of a business paid to shareholders in form of cash as compensation for investment is regarded as a dividend. By calculating depreciation, a business can take a certain amount as a deduction which is spread out over time. Some assets like machines lose efficiency as time goes by. Depreciationĭepreciation helps to determine the decreasing value of a company's assets. Debit is on the left hand of the account and it increases the asset account. Credit are entries that decrease an expense or asset account. Credit is recorded on the right side of a business account. Credit and DebitĬredit and debit are elements of a double-entry bookkeeping system. In the event of any complication, accountants use closing books at the end of the year as a reference. ![]() A closing book is detailed and contains all necessary information that ensures accuracy in the transactions of a business. Closing BooksĬlosing books, a physical ledger book used by accountants to record financial transactions for a timeline. It entails operation costs, investments, and earnings. Cash flow is the total outgoing and incoming money. Cash FlowĪ common financial term is cash flow. In some cases, capital is alternatively referred to as working capital used for daily business needs. It's the available funds in the account of a business. CapitalĬapital is the financial capacity of a business to manage day-to-day business activities. The liabilities, assets, and shareholders’ equity are revealed in a balance sheet. Balance Sheetsīalance sheets evaluate the financial state of a business and tell the worth of a business. An example of assets is company equipment and edifices. Assets generate cash flow, reduce expenses on production, and increase business revenue. AssetsĪssets encompass resources with economic value which is expected to bring future benefits. For example, publicly funded companies have four accounting periods which are reported to the Security and Exchanges Commission. Since an accounting period represents financial activities over a period, it's often used to analyze and compare financial performance from different periods. The accounting period refers to the length of time for which financial statements are issued. For example, if a restaurant sells a dozen of pastries to another business on credit, the amount due becomes receivable. It's the total amount owed to a business. Accounts ReceivableĪccount receivable is a direct opposite of account payable. An example of this is an amount owed by the textile industry for raw materials supplied. It's usually a short-term debt that a business must pay as scheduled to avoid a default. The amount a business owes to vendors and creditors for services or products purchased is regarded as accounts payable. Some key terms to keep in mind are: Accounts Payable Whichever way, it's best to familiarize yourself with accounting terms to adequately manage finances or stay updated with the activities of a hired accountant. While every effort has been made to ensure its accuracy, Quickstep Training can accept no responsibility for loss occasioned to any person, acting or refraining from action as a result of content in these materials.As a business owner, you may choose to outsource the accounting aspect of your firm or handle it personally. Any person who does any unauthorised act in relation to training materials produced by Quickstep Training may be liable to criminal prosecution and civil claims for damages. No part of these materials may be reproduced, distributed, shared, transferred, transmitted or introduced into a retrieval system, in any form, or by any means (electronic, mechanical, photocopied, recorded or otherwise) without prior agreement and written consent from Quickstep Training. ![]() Training materials - including but not limited to videos and pdf documents - are for use by the individual member only. Terms and Conditions: All rights reserved. Confirm password: * First Name: * Last Name: * Location: * Receive news on new releases but not too often? Unsubscribe any time.
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