All funds anticipated to be deposited into an account are recorded as debits. A credit is a list of all funds anticipated to leave an account. Debits and credits essentially keep track of where the money in your company is

Unpaid bills or cash that customers owe a business are referred to as “accounts receivable.” The term refers to the accounts that a company is entitled to following the delivery of a good or service. Receivables, also known as accounts

Although no cash has yet been exchanged, accruals are revenues received or costs incurred that have an impact on a company’s net income on the income statement. Since accruals involve non-cash assets and liabilities, they have an impact on the

The technique of spreading out an asset’s expense over a period of time that normally corresponds with the asset’s useful life is known as amortization in accounting. Since a significant expense produces income over time, amortizing it can help determine

An annuity is often referred to as a sort of contractual instrument that a person purchases with the expectation of receiving recurring payments in the future. The Social Security system, which people pay into during their working years in order

The broad definition of an asset is anything possessed that is valuable. But, what exactly are assets in accounting? Fiscal quantifiability must define assets for accounting purposes. Assets are a company’s measurable resources that can be expressed in monetary terms.

A company’s burn rate is the rate at which it spends money. It’s an essential part of calculating and managing your cash flow. Simply select a time period to calculate the burn rate (such as a quarter or a year).

A company’s capital is the money it has available to pay for day-to-day operations and to fund future growth. Working capital refers to liquid capital assets that are available for meeting daily obligations. Working capital is an indicator of a

The cost of goods sold, or COGS, refers to the direct costs that go into producing the goods or products that a company sells. Direct costs include the financial resources required to manufacture the product, such as raw materials and

Depreciation is a method of accounting for measuring and distributing the cost of an asset over its useful life. Depreciation refers to the loss of an asset’s value as it ages and can only be applied to tangible assets that

Equity, also known as net assets, is a finance term that refers to the amount of money that a company’s owners have invested in it. Also referred to as “owner’s equity” and can include non-monetary assets such as time, energy,

Expenses are any purchases or money spent in order to generate revenue. Expenses are also known as “the cost of doing business.” Although some expenses fall into more than one category, there are four main types of expenses. Fixed expenses

Fixed costs are costs that a company incurs on a consistent basis regardless of production quantity or revenue. Any costs that are consistent with a company’s normal operations are included in the general fixed cost definition. These include any regularly

A fiscal year is a company’s accounting period. The company determines the start and end dates of its fiscal year; some coincide with the calendar year, while others vary based on when accountants can prepare financial statements. The tax laws

Liabilities are monetary obligations that a company may have that are payable to a third party. Employee wages and benefits, taxes, insurance, accounts payable, and any expenses incurred during normal operation are all examples of liabilities. To define liabilities, a

The basic definition of revenue is the total amount of money brought in by a company’s operations over a specified time period. The revenue of a company is its gross income before deducting any expenses. Revenue is defined by profits

Variable costs are the expenses incurred by a business in proportion to its output or revenue. The broad definition of variable costs includes any costs that vary depending on how much product a company produces or revenue it generates in

Profit is defined as the financial benefit realized when the revenue generated by a business activity exceeds the expenses, costs, and taxes associated with the activity in question. Profits are returned to business owners, who can choose to pocket the