Aspirants those who are from the commerce background must have heard this term Accounting several times in their life time. Moreover, even if you are preparing for major government exams like SEBI Grade A 2020, RBI Grade B etc this term is quite important for the candidates to know. If you are preparing for any major banking and government exams at this point in time then this article is for you. In this article we are listing down important accounting terms along with their meanings which are used in this context and aspirants must know about these. This article will even be helpful for those who are not from Commerce background, but still are applying for above mentioned government jobs. These important terminologies of accounts are a must to know and this also adds to your accounting knowledge.
Before starting with the same, let us inform you about the SEBI Grade A 2020 last day for online registration of you are preparing for the same. The last date for online registration is 31st May,2020. So, those who haven’t filled the online registration yet must do so without any delay further. Moreover, along with preparing for these important exams one must also keep practicing the mock tests so as to get a fair idea about your weak and strong areas and on what all topics an aspirant need to focus more in order to score better.
Important Basic Accounting Terms
Terms Related to Income Statement
- Depreciation – It is the reduction in the value of a particular asset over a period of time. After certain years of purchase the value of an asset gets depreciated.
- Cost of Goods Sold – It is the total cost of a product incurred in the production and selling of goods also involving the cost of raw materials. The Cost of Goods sold even include labor charges.
- Gross Margin – It excludes the cost of sold goods and can be calculated gross profit over the revenue generated for a particular period.
- Income Statement – Income statement is not only about income but it is a place where you get all relevant information related to revenues, expenses and profits generated all in one single sheet keeping the revenue earned at the top.
- Net Margin – It represents the profit in terms of its revenue
- Net Income – Net Income can be calculated by subtracting the expenses from the total revenue generated.
- Gross Profit – Overall profit generated by a company over a period of time is marked as Gross Profit. It even includes the cost of goods sold.
Terms Related to Balance Sheet
- Balance Sheet – Every incoming and outgoing monetary expense and liabilities should have a financial record. The financial record of this is termed as Balance sheet. (Assets = Liability + Equity)
- Assets – Anything owned by a company that has some monetary value. It can be in the form of a land, shares, cash or stakes etc.
- Accounts Payable – When we are talking about Balance sheet, accounts payable are marked as liability. It refers to a business which a firm undertakes and the payment for the same is yet to be made for the case.
- Accrued Expenses – It is an expense that a company has already done, but it is still to be paid to the service provider.
- Book Value – Assets over time depreciates in value in terms of its life and money. The Book value refers to the price of the asset in the current date after the depreciating value is applied onto it.
- Equity – After removing all the liabilities from the assets, what is left is called Equity. This is the part which is owned by investors and owners.
- Liability – Debts that are to be still paid by the company are known as liability.
Terms Related to General Accounting
- Trial Balance – It is a listing of all accounts in General ledger with their balance amount. It can be either credit of debit. Total debits must equal the total credits.
- Cash Flow – The incoming and outgoing cash in a business is termed as Cash Flow. Subtracting the Ending cash flow from the beginning cash flow we can calculate the Net Cash Flow.
- Positive Cash Flow – This refers to more incoming cash flow than the outgoing cash flow.
- Credit – This is termed as an increase in the liability or an equity account.
- Debit – This is termed as decrease in the liability or equity account.
- Fixed Cost – As the name suggests this value does not change with the sales volume and remains fixed. For instance, salaries given to the sales employees at the end of the month. Companies give fixed salaries to the employees at the end of the month if they are doing more sales.
- General Ledger – A complete record of financial transactions is kept in here. General ledger is taken as a base while preparing financial statements.
- Journal Entry – This marks the changes that are being done in the company books. Each entry is allotted a unique identifier so that it can be tracked at a later stage if required.
- Liquidity – Cash flow of any asset is termed as Liquidity.
- Overhead Expenses – Expenses that are extra that are put in order to run a particular product or business are called overhead expenses.
- Payroll – Payroll defines the records for deductions, wages, salaries and benefits given to the employees. In the balance sheet it is often marked as a liability.
- Return on Investments (ROI) – This term is defined as the profit which a company is making over the amount that the company is spending starting from the production to the marketing and selling of a product.
- Variable Cost – Costs that change with the volume of sales undergone over a certain period.
This is all from us related to Important accounting terms. These terms should be clear and if you are preparing for the major government exams then these should be at your fingertips. So, learn and revise these accounting terms on regular basis in order to get the hang of it.Download Practicemock App for Updated Current Affairs, Free Topic-Wise Quizzes and Free Mini Mocks
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