Terms of any given trade are called “jargon”. Jargon is often used among people who are very familiar with the field. By learning the jargon of a trade, such as accounting, you will open yourself up to learning more about the subject and its key elements.
Small business accounting is a systematic way of presenting financial and non-financial business information so that readers can understand it and make better business decisions due to the data. Financial accounting terminology is the use of certain words that describe the information that is being given. Once you get used to the terms (or jargon) that are commonly used, you’ll be able to elevate your knowledge in accounting.
Here are some of the most commonly used words and terms in small business accounting and bookkeeping, so you can learn what they mean and get a better understanding of SMB accounting as a whole. Some of the financial accounting terminologies include:
Accounting is the act of recording financial and non-financial transaction data into the business’ ledger or ledgers. It deals with cash flow management and includes everything from purchasing supplies required to run the business or make a product to business tax preparation and planning. There are specific sets of guidelines and rules that governing agencies put into place for small business accounting that set the standard for these transactions such as the IRS and FASB. The rules apply to tax preparation and planning and any other activities concerning records and figuring.
The IRS, or Internal Revenue Service, is a term commonly used within the realms of small business accounting. It is a United States Federal agency that determines and enforces Federal tax regulations and rules through a set of standards called the IRC, or Internal Revenue Code.
The FASB is the Financial Accounting Standards Board. The board sets the rules for financial reporting that companies within the United States are required to follow. The standards are called the Generally Accepted Standards. The rules include tax preparation and planning and other practices within small business accounting.
A ledger is a way of organizing the accounts, a company has and the transactions that concern the account in cash flow management. It reflects when the account increases or decreases and has to do with balancing it. Everything that goes within the company financially should be reflected in a ledger.
Internal reporting is the financial data that is presented through reporting tools within the company like graphs and other financial statements. External reporting tools and data presented outside the company like bank statements. The two reporting types should always balance at the end of the reporting period.
A transaction is a process of exchanging services or goods between at least two parties, mostly to do in a business setting. Cash flow management goes from one party to the other and it is to be recorded accordingly when dealing with small business accounting.
The financial accounting terminology of the word “record” means the entry of a cash flow management transaction into a document called a ledger, so the action can become a permanent way of keeping up with it. Transactions in records should follow tax preparation and planning rules and regulations at all times.
Just as the term implies, a Chart of Accounts is where cash flow management records are kept for each account or a “place” where a company records transactions. There are seven types of accounts that may be used in the chart. When learning about small business accounting, it is helpful to learn the lingo. The words and terms above can help you immensely.
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