Essential Accounting Terms for Professionals and Students

Accounting Terms
Accounting Terms

Essential Accounting Terms for Professionals and Students

Understanding key accounting terms is crucial for finance professionals and students. This presentation covers essential concepts used in financial reporting and analysis. Let’s explore these terms to enhance your accounting knowledge.

Assets and Liabilities


Resources owned by a company that has economic value. Examples include cash, inventory, and equipment.


Financial obligations or debts owed by a company. These may include loans, accounts payable, and bonds.

Revenue and Expenses


Income generated from normal business operations. It’s the top line of the income statement.


Costs incurred in the process of generating revenue. These reduce a company’s profitability.

Net Income

The difference between revenue and expenses. They are also known as profit or earnings.

Debits and Credits

Debit Credit

Increases assets Decreases assets

Decreases liabilities Increases liabilities

Decreases equity Increases equity

Equity and Capital

Owner’s Equity

The owner’s stake in the business. It’s calculated as assets minus liabilities.

Paid-in Capital

Money invested by shareholders in exchange for stock. It’s a key source of funding.

Retained Earnings

Accumulated profits that haven’t been distributed to shareholders as dividends.

Financial Statements

Balance Sheet

Shows a company’s assets, liabilities, and equity at a specific point in time.

Income Statement

Reports revenues, expenses, and profit or loss over a period of time.

Cash Flow Statement

Tracks the inflow and outflow of cash from operating, investing, and financing activities.

Accounting Methods

Cash Basis

Records revenue when cash is received and expenses when cash is paid.

Accrual Basis

Records revenue when earned and expenses when incurred, regardless of cash flow.

Hybrid Method

Combines elements of both cash and accrual methods for specific situations.

Depreciation and Amortization


Allocates an equal amount of depreciation each year over an asset’s useful life.

Declining Balance

Applies a higher depreciation rate in the early years of an asset’s life.

Units of Production

Based on the asset’s usage or output rather than time.

Accounting Principles and Standards


Generally Accepted Accounting Principles used in the United States.


International Financial Reporting Standards are used globally.

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