Page 82 - March 2023
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  GET AHEAD IN BUSINESS:
UNDERSTANDING ESSENTIAL ACCOUNTING TERMINOLOGY
How often do business managers talk to their accountants and feel even more confused than they were earlier? This is probably the case with a number of entrepreneurs and managers that don’t come from a background in business or accounting for that matter.
In a bid to help business owners through the arduous process of managing their accounting resources, we have come up with a list of common accounting terms that most business managers come across during their time as entrepreneurs.
Terms in the Balance Sheet
As we have studied above, the balance sheet is one of the two most common financial statements produced by all kinds of business owners. The balance sheet contains a set of potentially confusing terms that can be difficult to understand for business managers with limited acumen of accounting terms and what they mean in a financial context. The most common terms used in the balance sheet and their definitions are:
Accounts Payable
The term accounts payable is said to define all the expenses that a business incurs but hasn’t yet paid. The accounts payable balance is recorded as a liability in the balance sheet, and the debt owed as a result of it has to
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be paid back. Accounts payable include payments to vendors and other lenders, which haven’t yet been made.
Accounts Receivable
Accounts receivable are the exact opposite of accounts payable. These accounts include all the sales that a company has made but hasn’t yet collected payment on. An example of this from a property manager’s perspective would be uncollected property managementfeesfromalandlord for a period that you have provided your services for. This account is listed on the balance sheet as an asset and can easily be converted to cash on a short-term basis since you have already provided the services required.
Accrued Expenses
An accrued expense contains all expenses that have been incurred by a business but haven’t yet been paid. Property managers tend to come across a lot of accrued expenses, as they pay for expenses after they have been incurred. An example of this would be the fee charged by an electrician for running repairs on a property. The expense has been incurred, but if it hasn’t yet been paid for, it will be recorded as an accrued expense.
Asset
Assets are an integral part of the balance sheet and consist of anything that the company owns,
and which has a monetary value associated with it. Assets are listed in the form of liquidity, with the most liquid assets being mentioned on top and others following. Since cash on hand is the most liquid asset a business can own, it is almost always mentioned near the top of the balance sheet.
Book Value
Every asset owned by the business is depreciated over time to adjust for the value it loses over its period of use. The associated net book value of the asset is computed by deducting the accumulated depreciation of the assets from the original value to mark the asset at its real value
 















































































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