do you know these terms of accounting?
Profit & Loss Statement - This is also referred to as the Income
Statement. It shows the income, expenses, and tells you how much profit (or
loss). It is usually created for each month. Some businesses have 13 four
week accounting periods instead of the traditional 12 months.
Balance Sheet - The balance sheet indicates the value of the business. It
has a list of the assets and liabilities. It is similar to the financial statement
you create when you go to the bank for a personal loan.
Current - On a balance sheet, current indicates anything that can be
expected to be changed to cash within the next 12 months if it is an asset.
And if it is a liability, it is anything that is scheduled to be paid in the next 12
months.
Long Term - The opposite of the definition for current, these are assets and
liabilities that are not expected to change in the next 12 months. With regard
to a loan that you would owe, while there is a part of the loan that would
change from long term to current each and every month, most accountants
move items from long term to current only once each year.
Cash Basis - Most people think they are on a cash basis accounting system.
This means that with the completion of each accounting period (usually a
month), all of the bills have been paid and all of the outstanding balances
have been collected. Technically, a business uses either a cash or an accrual
based accounting system. Actually, many businesses do have accounts
payable and accounts receivable that exist from month to month yet retain
the identity of a cash basis accounting system for all other areas.
Accrual Basis - Again, we have an item that is the opposite of the previous
definition. With cash basis, there are incomes and expenses that have
occurred over several months, but are posted in only one month (i.e.
income tax, property tax, business forms) With accrual basis, these and other
incomes and expenses are posted over several months to provide a more
accurate picture of what occurred in your business in the past month.
