In the financial world, each sector has its own jargon. With a language full of acronyms and financial expressions, those who come “from the outside” can get rather lost. Whether it is to run a business or make an investment, you need to perform a number of functions.
And for this, a more detailed knowledge is required, and this influences the vocabulary. That’s why we’ve selected seven financial terms that every business owner needs to know.
Read also: What is a financing?
Everything in your or any company is active. In almost all cases, accounting assets are tangible , that is, they are equipment, properties, tools, among other physical things.
In the category, the intangible assets are also included , that is, non-physical things. In the picture, it would fit actions, rights, patents, among other things.
Read more: Financial assets: know all types
Being somewhat the reverse of the previous, liabilities are debts. These debts a company has a responsibility to pay in the short or long term.
Monetary liabilities represent assets that will still be passed on to real owners in the future. Non-monetary liabilities, on the other hand, represent future posting obligations in the results of the period of those already affective gains.
As much as we already have an understanding of what expenses are, in different industries, there are four different types.
- Fixed expenses: are those that are consistent over time, ie, salary, rent, employee benefits. In this case, these expenses do not change with fluctuations.
- Variable expenses: related to the company’s production. Unlike the previous one, there are variations based on the increase or decrease of production and sales.
- Accumulated expenses : declared one-off accounting expenses. But that have not yet been paid.
- Operating Expenses: Costs required for a business to continue to function.
Very important for tax purposes, it is when the value of an item decreases after it is used. As equipment that affect the development of the company by depreciation.
Serves for used items for more than one year.
Defined as an exercise to confirm the final values before generating the financial statements . Credits and debits are placed on a spreadsheet to make sure everything is correct.
Recognition by competence
It is nothing more than a list of expenses recorded, but not paid, something similar to the expenses accumulated.
These acknowledgments are related to items that will reach your accounting books soon, either positive or negative.
Compensation recognition accounting
It occurs when companies declare when a revenue is received and when there are expenses incurred. In this case, it allows flexibility when both expenses and revenues are recognized.