It All Adds Up

Learning the Terms

To choose the right accounting software for your business, you should understand these basic accounting terms:

Asset-A tangible or intangible object of value to its owner.

Liability-An obligation to another party.

Income-Money received for goods or services produced or as a return on investment.

Expense-Money spent for goods or services.

General Ledger-The main records of the assets, liabilities, income and expenses of an organization.

Accounts Payable-A company liability; amounts due to suppliers of goods or services.

Accounts Receivable-A company asset; amounts owed for goods or services that have been supplied.

Capital-The net worth of the company; the assets less the liabilities.

Double-entry accounting-A system in which the total of all left-side entries is offset by an equal total of right-side entries. Left-side entries are known as debits, and right-side entries are known as credits. A debit or a credit can be applied to any general ledger account, whether it's an asset, a liability, capital, income or an expense.

Like this article? Get this issue right now on iPad, Nook or Kindle Fire.

This article was originally published in the August 1997 print edition of Entrepreneur with the headline: It All Adds Up.

Loading the player ...

What Great Brands Know: Don't Chase Customers

Ads by Google

Share Your Thoughts

Connect with Entrepreneur

Most Shared Stories