Basic Business Terms

Assets:

• Assets are defined as resources or things that are owned by a company.
• Assets are divided into two categories. which are:
• Current Assets 
• Fixed Assets  

Current Assets:

• The current assets are those that will be used within short period or less than one year.
• The current assets are cash, inventory, accounts receivable. etc.

Fixed Assets:

• The fixed assets are more long term and will likely provide benifits to a company for more than one year.
• This are lands, machinery, vehicles, furniture etc.

Accounting Equation:

Liabilities:

• A Liability is an obligation and it is reported on company's balance sheet.
• A common example of a liability is accounts payable.
• It has divided into two categories. Which are:
• Current Liability
• Long Term Liability

Current Liabilities:

• The current Liability are those debts that are payable with in a one year or in short term.
• The examples are debt to supplier, sales taxes, interest payable. etc.

Long-Term Liabilities:

• The long term liabilities are typically payable over long period of time that is greater than one year.
• An example of this type liabilities would be bank loans, corporation bonds etc.

Accounts Payable:

• The abbreviation for Accounts Payable is "AP" or "A/P".
• AP are amounts a company owes because it purchased goods or services on a credit from a supplier or vendor.
• Accounts Payable are liabilities and it will decrease a company's cash.
  

Accounts Receivable:

• The abbreviation for the Accounts Receivable is "AR" or "A/R".
• AR are amounts a company has right to collect because it sold goods or services on credit to a customer.
• Accounts Receivable are assets and it will increase a company's cash.

General Journal:

• The general journal is also called as "book of original entry".
• It is recognized as the first book of entry in the accounting or book-keeping process.In this process all the accounting transactions are recorded in general journal in a chronological order.
• It provides a description with each transaction.

• The transactions and records from the general journal are transferred to the general ledger accounts.
• After balance are calculated, they are transferred from ledger to a trial balance.

General Ledger:

• General Ledger contains the complete record of the financial transactions over the life of a company.
• A general Ledger is the master set of accounts that summarize all transactions occurring with an entity. 
• It contains a debit and credit entry for every transaction recorded within it, so that the total of all debit balances should always match the total credit balances.
• This general ledger include assets, liabilities, owner's equity, revenue, expenses, gains and losses.

Trial Balance:

• A trial balance is a bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit  columns.
• The purpose of trial balance is to ensure that the all entries made into an organization's general ledger are properly balanced.
• In this trial balance sheet the total of the debit balances is equal to total of the credit balances.

Financial Statements:

• It is formal record of the  financial activities of an entity.
• Financial Statements reflect the financial effects of business transactions and events on the entity.

Balance Sheet:

• It is also known as "Statement of Financial Position".
• The  balance is a statement that summarises a company's assets, liabilities and shareholders equity at a specific point in time.
• The date at the top of the balance sheet tells you when it is created, which is generally at the end of the financial year.
• It works on accounting equitation which is shown above(at top of the page).

Income Statement:

• It is also know as "Profit and Loss Statement".
• It is a report of income, expenses and the profit or loss earned during an accounting period.
• It is important because it shows the profitability of company during the time interval specified in its heading.
• If a company was not able to operate profitably, then the bottom line of the statement indicates a net loss.
• If a company that has operated profitably, then the bottom line of the statement indicates a net income.

Cash Flow Statements:

• It is also known as "Statement of Cash Flow".
• It tells you how much cash went into and out of a company during a specific time frame such as a quarter or a year.
• The movement in cash flows is classified into following segments:
• Operating Activities
• Investing Activities
• Financing Activities

Supplier:

• A supplier is an entity that supplies the goods or services to another organisation or person.
• A supplier is usually a manufacturer or a distributor.
• The supplier may also a vendor in some cases, where the supplier directly supplies the goods to the client.

Vendor:

• Vendors are the people and business from which you purchase goods and services.
• A vendor who one vends the products to the customers.
• A vendor is a supplier of goods or services, if you are a retail company, your vendors may  be the suppliers of the goods  you resell to customers.
• The vendor may maintain the close relationship with the customers and the vendor is the last person involved in the supply chain.

Bill of Lading:

• Bill of Lading is short term is "BoL" or "B/L".
• The word lading means "loading". Lading specifically refers to the loading of cargo aboard a ship.
• A bill of lading is a contract of shipping and it is a document by Carrier or his agent to acknowledge of a shipment of cargo.
• .It is usually indicates the shipment origin and destination points, the name of carrier, description of freight, dimension and weight and any special instructions.

Packing List:

• The packing list is generated by the supplier to the customer with the details of goods description.
• It includes the items name, description, price details, supplier details, destination details, terms and conditions etc.