Bling Lingo simple

Today … again … I was scratching my head over the accounting mess, which the owner had paid into accounts many dollars over many years. How did it happen? If you do not know the basics, you’re a sitting duck, my friend. You know, the auditors it on purpose. They use strange words to make you think they are better than you. To keep you in the dark. Or, the less nasty ones just do not know better.

Good accountants and bookkeepers want to learn the lingo. They want to help you make the blind, baby! So, read and learn. Keep this glossary well as you work with professional money managers. Use it to start your journey to financial literacy

Bling Lingo – Glossary of common accounts …

ACCOUNTING equation: The Balance Sheet based on the basic accounting equation. Which is

Assets = Equities

Equity can be held by someone other than the owner .. It’s called responsibility. . Since we usually have some debt, accounting equation is usually written …

assets = Equity

accounts Business activities cause increases and decreases in assets, liabilities and equity. Your accounting system records this activity in the accounts. A number of bills needed to pull together rise and fall of each asset, liability and equity owner’s balance sheet and any income and expense shown on the income statement. You can have several accounts or hundreds, depending on the kind of details that you need to run your business

payable :. Also called A / P. These are bills that your business owes to the government or your suppliers. If you have ‘bought’ it, but have not paid for it yet (as when you buy an “account”) you create an account for payment. This is in part responsible for the balance sheet

Trade :. Also called A / R. When you sell something to someone, and they do not pay you for a minute, you create an account receivable. This is the amount of money your customers owe you for products and services they bought from you … but have not paid for yet. Receivables in current assets in the balance sheet

accrual ACCOUNTING :. With accrual accounting, you realize ‘expenses and sales at the time of the transaction. This is the most accurate way realize activities. If you sell something that Mrs. Fernwicky today, you would take sales from today, even though she wants to pay you for two months. If you buy some paint today, you account for it today, even if you pay for it next month when the supply house statement comes. Cash accounting sales when cash is received and expense when the check is carried out. Not as accurate picture of what is happening to you company

ASSETS :. ‘material’ The company owns. Anything of value – cash, accounts receivable, trucks, inventory, land. Current assets are those that can be converted into cash easily. (Officially, within about a year.) Last current assets are cash, of course. Accounts will be converted into cash as soon as the customer pays, hopefully within a month. So, receivables are current assets. So file.

Fixed assets are those things you would not want to be converted into cash to operate money. For example, you do not want to sell the house to cover supply house bill. Assets are listed in order of liquidity (how far it is in cash) on the balance sheet

BALANCE SHEET DATE :. The balance sheet reflects the company’s financial condition on a particular day. Basic accounting formula is the basis for the balance sheet

assets = Equity

sheet does not start again. It is a cumulative score from the first day of operations at the time the report is created

CASH FLOW :. movement and timing of cash in and out of the business. In addition to the balance sheet and the income statement, you may want to report the flow of cash through the business. Your company could be profitable but ‘cash poor “and not pay your bills. Not good!

cash flow statement helps keep you aware of how much money came and went for any time. A cash flow projection was educated guess what flows cash situation will be in the future.

Say you want to buy a new truck with cash. But the acquisition empty bank account and leave you without cash for payroll! Motives cash flow, you might choose to buy car payments instead

charts of accounts :. A complete listing of each account in the accounting life. Every business in your company has to be registered, so you can keep track of things. Think of the chart of accounts PEG board you hang activities

CREDIT :. credit is used in double-entry accounting to increase debt or equity. A credit will decrease an asset account. For every credit there is a debit card. These are two factors balance each journal entry. Credit and debit keep the basic accounting equation (assets = liabilities + owner Equity) in the balance as you take activities

debit. A debit card is used in the double-entry accounting to increase the asset account. A debit decrease debt or equity. For every debit there is a credit

direct costs :. Also called product use, cost of sales or workspace expenses. These are expenses that include the cost of work and materials. These expenses can be directly attributed to a particular job. If the job does not happen, the direct costs had not been incurred. (Compare the direct cost of the indirect costs to get a better understanding of the concept.) Direct costs can be found on the income statement, just below income accounts

Revenue -. Direct Costs = margin

entry bookkeeping: An accounting system is used to keep track of activities. Double-entry accounting, but the balance sheet: Assets = Liabilities + Equity. When dollars are recorded in one account, will move to another account in a manner that the activity is well documented and the balance sheet stays in balance.

You may not need to be an expert in Double -Entry accounting, but the person responsible for creating the financial statements better to get pretty good at it. If you are, go back through the book and focus on the “gray” leaves. Unless example and see how Double-Entry process serves as a check and balance your books.

Remember the law of the universe … what goes around, comes around. This is the essence of double-entry bookkeeping

EQUITY :. funds that have been available to the company to get ‘stuff’. Equities show ownership of property or claims against the assets. If someone other than the owner of a claim on the assets, it is called responsibility

Total assets -. Total Liabilities = Net Equity

This is another way to define the basic accounting equation that focuses on how much property you own. Net equity is also called capital

cost :. Also called cost. Expenditures are reduction in equity. These are the dollars paid out to suppliers, manufacturers, Uncle Sam, employees, charities, etc. Remember to pay your bills, fortunately, because it takes money to make money. Expenses are recorded on the income statement. They should be divided into two categories: direct costs and indirect costs. The basic equation statement

Revenue – Expenses = Profits

(You will see the benefit if there is more income than expenses … or loss, if expenses are more revenue.)

Remember, you have to be included in the sale price of your all costs. The customer pays for everything. Instead, you give the customer service. What is the deal

FINANCIAL STATEMENTS refer balance sheet and income statement. The balance sheet is a report that shows the company’s financial position. Income statement (also called income statement or ‘P & L’) is earnings summary.

Statements may contain documents like reports cash flow, accounts receivable reports, business files, etc. all report that monitors the movement of money in your business.

financial statements is what the bank wants to see before loan you money. The IRS says that you share the difference between them and asks for your financial statements every year

financial :. Once, accounting was kept in a book that recorded increases and decreases in all the company’s accounts. This book was called the general ledger. Today, you probably have a computerized accounting system. Still, the general ledger is a collection of all of balance sheet and profit and loss accounts … all assets, liabilities and equity. There is a report that shows all activities of the company. Often called the registration details of the trial balance report menu accounting program. The detail of trial balance is favorite my report when I’m trying to find a mistake, or make sure that we have entered the information on the accounts of

Margin :. This is how much money you have left after you reduce the direct costs of the sale price

Income -… Direct Cost = Margin When this is expressed as a percentage, it is called margin

This is a good number to scrutinize every month, and to monitor the percentage of total sales over the course of time. The higher the better by a margin! You need to have enough money left at this point to pay all the overhead and still end up with a profit

statement :. also called income statement or P & L, Statement of Operations. This is a report that shows the changes in equity for the company’s business. There is a list of income (or income, or sales), reduces costs and helps you profit J! (Or loss L.) This report covers the time and summary money and money out.

profit is like a magnifying glass that shows the details of the activities that cause changes in the equity section of the balance sheet

indirect costs :. Also called overhead or administrative costs. These fees are indirectly related to the services you provide to customers. Indirect costs include office salaries, rent, advertising, telephone, utilities … the cost to keep a ‘roof over your head. “Any costs that are not direct costs, indirect costs. Indirect costs do not go away when sales fall off

File :. also called the stock. This is stuff you buy in order to sell, you have not sold them yet. Inventory is available on the balance sheet under assets. It is believed current property because you will convert it into cash as soon as you sell it. Beware of turning the money in stocks. You can run out of money. Work with suppliers to keep a record Small

Journal: . This is a calendar company. It keeps track of time series. Each activity is recorded as a journal entry. The Double-Entry will list the debit and credit account for each transaction on the day it occurred. Reports menu in accounting computer calendar entries are recorded in the transaction file

LIABILITIES Like shares, these are the sources of assets – how you got the ‘stuff’ .. These are claims on assets by someone other than the owner. This is what the company owes! Notes payable, income taxes payable and loan debt. Liabilities are classified as current liabilities (need to pay within one year, such as payroll tax) or long term (pay-back is more than one year, such as building a mortgage).

MONEY : Also called moola, scratch, gold, coins, cash, change, chicken feed, green materials, Bling, etc. Money is a form that we use to exchange energy, product and services for other energy products and services. Used to buy things you need or want. Beats trade for chickens in the international market.

Money in itself is neither good or bad. I want you to do lots of it, and do great things with it

net income Also called profit, profit, current income or bottom line. (No wonder accounting is confusing – look at all those words that mean the same)

After you’ve drawn all costs (including taxes) from the income, you’re left with a net income. The word net means basic, fundamental. This is a very important factor in the income statement because it tells you how much money is left after business. Think of net income as score on one basketball game in a row. Net income tells you if you won or lost, and by how much, for a given time.

By the way, if net income is negative, it is called a loss. You want to avoid them. Net income reflected in the balance sheet in the equity market section, under the current income (or profit). Net earnings income equity owner. . A loss leads to a decrease in equity owner

retained earnings: The amount of net income earned and retained by the company. If net income is like the situation one basketball, retained earnings maturity statistics. Retained earnings can be found in the equity part of the balance sheet. It keeps track of how much of the total equity of the owner was working and kept by the company against how much capital has been invested by the owners (paid-in capital).

every month, net profit reflected in the balance sheet as current income. At the end of the year, the current income added to the retained earnings account.