Accounting Terms

Accounting Period:	The period of time over which a company’s business transactions are recorded and at the end of which the company’s financial statements are printed. Most accounting systems have an accounting period of one month.
Accounts Payable:	Money owed by the company for goods and services provided by its suppliers.
Accrual Method:	A method of stating income whereby revenues are recognized in the accounting period in which they are earned, not when the payment are received.
Assets:	Things that you own that have lasting value. Example: Cash on-hand, Bank accounts, Account Receivable, Inventory, Equipment, land, real-estate.
Balance Sheet:	A summary of what a company owns and owes on a particular day. It has three main categories: assets, liabilities and equity. If the current assets aren’t bigger than the current liabilities you are going to have a cash flow problem because the cash coming in is less than the bills you owe.
Equity:	The worth of a business to its owner. To calculate the owner’s equity, subtract the liabilities from the assets.
Liabilities:	Money that you owe to other people. Ex: Bank Overdraft, Demand Loan, Accounts Payable, Shareholders Loan.
Shareholders Loan:	Money that your limited company owes to its shareholders (you). This money can be withdrawn from the company without paying taxes.
Gross Profit:	Sales revenue minus direct costs. Direct costs are the cost of acquiring or building the items sold, including labour and materials. No overhead expenses have been deducted.
Overhead Expenses:	Expenses that are there whether you sell anything or not such as: rent, telephone, bank charges, insurance, utilities, etc.
Income Statement:	A statement which shows the revenues, expenses and net income for a particular period.
Proprietorship:	A form of business organization in which the owner and the company are not legally separate, but keep separate accounting records. A proprietor (the owner) has unlimited liability. He can be sued personally for the debts of his company.
Partnership:	A form of proprietorship in which there in more than one owner. The owners have unlimited liability and any one of them could be sued separately for the entire debts of the partnership.
Corporation:	A form of business incorporated under the laws of one of the ten provinces or the federal government. Its owners are called shareholders because their ownership is represented by shares of stock issued by the corporation.