Readout this post and know about essential accounting terms for small businesses.

1. 6 Essential Accounting Terms for
Small Businesses

2. Working with your bookkeeper is the best way to
learn about how you’re doing financially. It is
essential that you work closely together throughout
each quarter on an ongoing basis in order keep up-to
date and understand any issues better than before!
We have found that a lot of small business owners
are master of their trade but have some difficulties in
understanding the accounting jargon or in
communicating with the bookkeeper to better
understand the financial health.

3. If you want to increase your accounting knowledge
so you can have more informed, insightful
discussions with your account this quarter?
Start right now, with this list of 7 essential accounting
terms for small business owners.

4. 1. Balance Sheet: A balance sheet is a snapshot of
your company's financial position at a specific point
in time. It lists your assets (what you own) and your
liabilities (what you owe). The difference between
the two is your net worth.Balance sheets provide the
basis for computing rates of return for investors and
evaluating a company's capital structure. In short,
the balance sheet is a financial statement that
provides a snapshot of what a company owns and
owes, as well as the amount invested by
shareholders. Balance sheets can be used with other
important financial statements to conduct
fundamental analysis or calculating financial ratios.

5. 2. Profit and Loss Statement: A profit and loss
statement, also known as an income statement, is a
summary of your company's revenues and expenses
over a specific period.The P&L statement is a
financial report that shows how much profit or loss
exists in an organization at any given time. This can
be broken down into two categories: positive
numbers, which represent increases to company
revenue; negative figures related with cost reduction
efforts gone sour because they decreasingly affect
their bottom line (the amount left over after all
expenses have been paid).

6. 3. Accounts Receivable & Accounts Payable:
Accounts receivable is the total amount of money
that your customers owe you. This figure includes
both current and past-due invoices. Accounts
payable is the total amount of money you owe your
suppliers. This figure includes both current and past-
due invoices.

7. 4. Cash Flow statement: Cash flow is the movement
of cash in and out of your business. It's important to
track your company's cash flow so you can make sure
you have enough cash on hand to cover your
expenses. The CFS measures how well a company
manages its cash position, meaning how well the
company generates cash. The CFS complements the
balance sheet and the income statement. The main
components of the CFS are cash from three areas:
operating activities, investing activities, and financing
activities.The two methods of calculating cash flow
are the direct method and the indirect method.

8. 5. Budget: A budget is a plan for how you want to
use your company's money over a specific period. It
can help you track your expenses and stay on track
with your financial goals. A budget is basically a
financial plan for a defined period, normally a year
that is known to greatly enhance the success of any
financial undertaking. Corporate budgets are
essential for operating at peak efficiency. Aside from
earmarking resources, a budget can also aid in
setting goals, measuring outcomes, and planning for
contingencies. Personal budgets are extremely useful
in managing an individual's or family's finances over
both the short- and long-term horizon.

9. 6. Gross profit and net Profit: Gross profits are what
remains when you subtract COGS from your total
revenue. Net Profit, on other hand, reveals more
details about how much money is made after all
operating expenses have been paid - including taxes
owed or interest paid for debt using credit card bills
as an example of borrowings against inventory
purchases which will decrease its worth over time if
not proactively retired through sale/exchange
transactions with respective creditors.

10. We hope this list of essential accounting terms will
help you better understand your company's. Please
let us know if there were any other terms you would
like for us to help you with, join the conversation,
and empower smarter decision-making.
Contact iKeep for bookkeeping services.