Acounting Terminology for Non-accountants
Accounting terminology for non-accountants
At Qoyod, we have collected the most important accounting terms that are commonly used in accounting and important for any entrepreneurs who do not have an accounting background.
- Debit and credit accounts:
In accounting, all accounts fall into two types, either a credit account or a debit account.
Accounts receivable are: assets and expenses
Accounts of a credit nature are liabilities, revenues, and equity.
We may place accounts of a debit nature in the place of the creditor in the journal entries, to clarify the shortfall that occurred in the account, as well as the creditor.
- Creditor: He/She is the one who pays or gives an amount of money, a good, or a service.
- Debtor: He/She is the one who receives or takes an amount of money, a commodity or a service.
- Credit Note: It is the document that is sent to the clients and makes them creditors of the organization. It is proof by the organization that the customers have rights that must be paid to them, such as sales values. “Recovering goods from a customer”
- Debit Note: It is the document that is sent to the vendors and makes them owe the organization. It is proof by the organization that it has a right that must be taken from the vendor, such as purchase values. “Return goods to supplier”
- Assets: The term assets expresses the economic resources that the organization possesses, including machines, land, cash, and others. They may be intangible, such as brands.
- Current Assets: They are the assets that are expected to be converted into cash – and cash in itself is a current asset – sold, or used during the fiscal year.
- Fixed / non-current assets: Organizations, often, acquire assets to use them in the production process and not to resell them.
- Liability: They are the obligations of the organization towards others in return for products, services, or loans.
- Equity: It is the funds that owners of an organization own in that organization.
- Revenue: It is all that the organization or the state generates in terms of cash, commodity, or service income as a result of providing a product or service.
- Expenses: It is all that the organization spends in exchange for the completion of work such as employees ’salaries, rents … etc.
- Purchase orders: You consent to purchase before the purchases arrive at your organization.
- Journal Entries: It is a method of recording financial transactions in a way that clarifies both the date and value of the transaction as well as the value of each party with a brief explanation describing this transaction.
- Financial Statements: They are the financial statements of the organization that are in the form of reports that clarify the financial status of the organization during a period or at some time. They are represented in the income statement, the balance sheet, the cash flow statement, and other types of statements.
- General ledger: It is T -shaped and shows the movement of accounts and their balances from the reality of the general journal. Each account has one or two pages to transfer to, from the general journal, by registering the parties of the debit record on the debtor side of the ledger in each account. The credit party is registered on the credit side of his account, and this account is considered an audit of the sub-accounts.
- Closure Entries: It is the process by which the balances of all nominal accounts (revenues and expenses) are reduced to zero and the net profit or loss is determined.
- Market Value: It is the value of a share in the market, which is the outcome and result of share trading affected by supply and demand factors.
- Book Value: It is the net value of the share according to the historical value of the assets and liabilities of the organization after subtracting the accumulated depreciation.
- Depreciation: It is the gradual decrease in the historical cost of the asset. As for the methods of calculating it, they are many, but the most famous one is that the book value of the asset decreases at the end of each period; due to the material depreciation that occurs to the asset as a result of its use or the emergence of new inventions and innovations. Depreciation is for fixed (non-current) assets.
- Historical Cost: It is the best basis for evaluating an organization’s assets where the cost includes all the expenses incurred by the organization in obtaining the asset until it is ready for use in the place allocated to it in the organization, and for the purpose for which it was owned.