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Basic terms in accounting

By Edited Dec 18, 2015 0 0

One of the things take can be beneficial of  having knowledge about and become useful later in life  are accounts. There are situation in life when  this kind knowledge is of great help to someone. In situations such as applying for job in marketing company, plans to join a family business, ambition to be appointed on a managerial position in a large company or a wish to be able to manage your own assets and liabilities knowing the basics of accounts is something that is absolutely required.

In general accounting can be spit in two categories: Cash Based Accounting and Accrual Accounting.

The Cash Based Accounting is about someone’ s personal monetary transactions. Cash Based Accounting occur when actual cash transactions are conducted. This way a record of the money he received, deposited gave and withdrew  on any occasion is made for keeping.

The Accrual Accounting is the other category of accounting. The Accrual Accounting demands that accountant keeps track of all the transactions even if there was not exchange of money. The method of Accrual Accounting compares the ratio of expenses to expenditure. From here two situations can occur.  If the expenditure is greater than the expenses then  money should be saved by spending less on luxuries, and if it's the opposite, it would be wise to save some money.  Accrual Accounting determines the amount of money that was owed and will not necessarily match with the balance of the bank account.

When we are talking about accounting there are some important terms to know.

One of them is Assets. Assets are all the valuable things that belong to a certain individual. There are three main types of assets.

Current assets are money that the individual has. Money from personal accounts such as savings accounts and checking accounts is also included here. Other things that are included are securities such as stocks, bonds, shares etc. Also included is the money that was given as loan to clients.

Fixed assets are valuable things that are owned by individual such as machines, equipment, property, and others that are not meant to be sold.

Intangible Assets are things like trademarks, patents, copyrights that have a great value in money.

Liabilities are opposite to Assets. Liabilities comprise the debts that the individual has and must repay them.  Liabilities are paid back using money and other valuable goods. There are two kinds of liabilities.

Current  liabilities are those liabilities that must be paid with current assets and they have a time limit to which they must be paid. Current liabilities include things like your current monthly bills, loans that need to be repaid in the next 30 days to banks and loan companies, taxes, interests etc.

Long term liabilities are debts that need to be repaid in more that 30 days. Because of this long term liabilities are easier to repay

 

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