On the balance sheet, assets are listed in a specific order based on their liquidity, starting with cash, which is most liquid, and ending with land, which is least liquid. All assets have what is referred to as a convertible value, meaning that they could be sold for cash. In other words, the liabilities and equity combined are assets, thus the name balance sheet.Īn asset is anything a company owns. The formula used to calculate a balance sheet is assets = liabilities + equity. The balance sheet reflects the company’s assets, liabilities, and equity at a specific point in time, rather than over a range. Balance Sheet TermsĪ balance sheet is a summary report that shows a company’s assets (what it owns), liabilities (what it owes), and equity. Terms will include commonly-used abbreviations where applicable. We have assembled some of the most important accounting terms to provide you a good start in navigating the accounting realm.īelow you will find some of the most common accounting terms divided by these categories: balance sheet, income statement, bookkeeping terms, business structures, people, and general terms. Whether you’re looking at implementing accounting software in your small business or hoping to communicate better with your accountant, knowing some basic accounting terms can help you interface more effectively with the business world. ![]() ![]() Not everyone has an accounting degree, of course, but many of us need a basic understanding of accounting terms.
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