{"id":5908,"date":"2017-09-13T16:15:37","date_gmt":"2017-09-13T14:15:37","guid":{"rendered":"https:\/\/trabajaendireccionfinanciera.com\/?p=5908"},"modified":"2020-05-26T14:43:12","modified_gmt":"2020-05-26T12:43:12","slug":"17-accounting-terms-an-entrepreneur-should-know","status":"publish","type":"post","link":"https:\/\/eiposgrados.com\/eng\/blog-direccion-financiera\/17-terminos-contables-emprendedor-deberia-conocer\/","title":{"rendered":"17 accounting terms that every entrepreneur should know"},"content":{"rendered":"

The understanding of some\u00a0accounting terms<\/strong>\u00a0It is very important for entrepreneurs. It is in some\u00a0decision making<\/strong>\u00a0that are based on own accounting information or that of other companies and institutions. Likewise, it is necessary to be able to collaborate in planning and control tasks. It is also true in compliance with certain\u00a0accounting and tax obligations<\/strong>. And it is also because it improves your\u00a0corporate culture<\/strong>.<\/p>\n

Within the set of accounting terms, along with those of cost accounting, others gain special relevance, such as those related to the\u00a0financial Accounting<\/strong>, since it constitutes the main\u00a0presentation letter<\/strong>\u00a0against third parties.<\/span><\/p>\n

Why should the entrepreneur know some accounting terms?<\/h2>\n

Accounting terms have a\u00a0definition\u00a0<\/strong>formal, which regulatory evolution tends to qualify over time. This definition is intended\u00a0define some aspect<\/strong>\u00a0of business life for your\u00a0quantification<\/strong>. Thanks to this framework we can establish, not without certain limitations, in some important cases,\u00a0analysis and comparisons<\/strong>.<\/p>\n

There are many accounting terms. Some are integrated into the\u00a0colloquial language<\/strong>\u00a0of the majority of the population, although it is not unusual to find some confusion. Thus, for example, many people find it difficult to differentiate what is a collection of income or a payment of an expense.<\/p>\n

The life of an entrepreneur is dizzying. Fortunately, today there are tools that make it easier to develop several tasks in parallel. Therefore, the\u00a0collaboration<\/strong>\u00a0with the accounting advisor and, where appropriate, with the company's accounting department is crucial.<\/p>\n

The accountant is responsible, among other functions, for deciphering the accounting information to\u00a0that is understandable by the management<\/strong>. Therefore, it is a key piece for the company. In many cases, dubious points (even for professionals) and complex issues will arise. And, frequently, some important decision will revolve around these aspects that will demand the attention of managers and owners.<\/p>\n

So that there can be good communication between the internal or external accounting staff and the rest of the company, it is important\u00a0that the address has a\u00a0<\/strong>minimal knowledge<\/strong>. It is not that you know all the national and international accounting standards, administrative resolutions and consultations and jurisprudence. It's about having\u00a0a mental idea of what the most common concepts in accounting language refer to<\/strong>.<\/p>\n

The top seventeen accounting terms<\/h2>\n

All accounting terms can be interesting for the entrepreneur. The more you know and the better you master them, the easier it will be for you to navigate this field. However, there are some that have more use, of which we can say that it is\u00a0essential\u00a0<\/strong>harbor a mental idea. Let's look at the main ones.<\/p>\n

 <\/p>\n

1) Active<\/h3>\n

The\u00a0assets<\/strong>\u00a0are the\u00a0estate<\/strong>\u00a0that the company owns, but also the\u00a0rights<\/strong>. For example, a machine is an asset, but so are other intangible elements such as a patent right. We can say that they are the\u00a0investments<\/strong>\u00a0that the company has made.<\/p>\n

 <\/p>\n

2) Passive<\/h3>\n

The passive represents the\u00a0financing<\/strong>\u00a0of the company. Everything that has been invested has had to be financed in some way. In general terms, it includes both the money that belongs to the owners of the company and the\u00a0debts<\/strong>. In a more restricted sense, only debts are understood as liabilities.<\/p>\n

 <\/p>\n

3) Own funds<\/h3>\n

The\u00a0own funds<\/strong>\u00a0They are the part of the company that has been financed with money that belongs to its owners. These funds include what was put in when the company was established, what was subsequently contributed in successive capital increases and the profits that have been retained in the company, instead of being distributed to the owners.<\/p>\n

 <\/p>\n

4) Net worth<\/h3>\n

Traditionally, the concept of own funds and net worth have been taken as practically synonymous. However, the General Accounting Plan understands\u00a0net worth as a broader concept<\/strong>. In addition to own funds, subsidies, donations and legacies and certain accounting adjustments made to certain financial instruments are part of net worth.<\/p>\n

 <\/p>\n

5) External financing<\/h3>\n

The\u00a0Foreign financing\u00a0<\/strong>They are the debts of the company. Among them, we find, for example, the financing provided by banks or what, in the case of some large companies, they obtain from the issuance of bonds, company promissory notes and other debt securities. Likewise, part of external financing is what is owed to suppliers, the Treasury, Social Security, the money owed to workers, etc.<\/p>\n

 <\/p>\n

6) Income<\/h3>\n

The\u00a0income\u00a0<\/strong>They are the increases in the company's net worth that are not produced by contributions from the owners. Sometimes, they coincide with the charges, but not necessarily. For example, the return of money owed to us represents a collection, but not income that increases net worth.<\/p>\n

 <\/p>\n

7) Expense<\/h3>\n

The\u00a0bills\u00a0<\/strong>They are decreases in the company's net worth that do not have the owners as recipients. For example, a capital reduction, if it entails the return of contributions, implies a payment that does not involve an expense.<\/p>\n

 <\/p>\n

8) Balance sheet<\/h3>\n

He\u00a0balance<\/strong>\u00a0It constitutes a kind of \u201cstill snapshot\u201d of how the company's assets are made up at a given time and how it has been financed. Normally, it is done at the end of the year.<\/p>\n

 <\/p>\n

9) Profit and loss account<\/h3>\n

Unlike the balance sheet, it does not measure what happens at a specific moment, but rather\u00a0throughout an entire period<\/strong>\u00a0between two moments, normally the opening and closing of the financial year. Collect all income and all expenses.<\/p>\n

 <\/p>\n

10) Cash flow statement<\/h3>\n

It is an accounting statement that analyzes where the\u00a0collections\u00a0<\/strong>and where are they destined?\u00a0Payments<\/strong>. The different movements are analyzed depending on different types of activities.<\/p>\n

 <\/p>\n

11) Memory<\/h3>\n

The\u00a0memory\u00a0<\/strong>it's a\u00a0explanatory document<\/strong>\u00a0which adds clarifications and details that allow a better understanding of the company's situation. It is divided into a series of points, in which notes are made that serve to complement what we know through other accounting statements such as, for example, the balance sheet and the profit and loss account.<\/p>\n

 <\/p>\n

12) Annual accounts<\/h3>\n

The\u00a0annual accounts<\/strong>\u00a0a\u00a0set of documents<\/strong>\u00a0that aim to reflect the situation and evolution of the company. For third parties outside the company, it constitutes one of the most available approximations to the reality of the company. Therefore, there is an obligation to formulate them and deposit them in the Commercial Registry. The standards require different formats of annual accounts depending on the characteristics of the company.<\/p>\n

 <\/p>\n

13) Accounting consolidation<\/h3>\n

It is an operation through which it is intended to show accounting information referring not to an individual company, but to a\u00a0cluster<\/strong>. Normally, these will be companies that remain under the same\u00a0control<\/strong>, that is, a parent company and its subsidiaries.<\/p>\n

 <\/p>\n

14) Working capital<\/h3>\n

He\u00a0working capital<\/strong>\u00a0It is the part of the company's long-term financing that serves not only to finance long-term investment, but also a proportion of short-term investment. In this way, the aim is to avoid having to get rid of long-term investments in order to satisfy short-term debts.<\/p>\n

 <\/p>\n

15) Provision<\/h3>\n

The\u00a0provisions\u00a0<\/strong>They include disbursements that the company is likely to have, but in which there are doubts about their amount or when they will have to be made. In another broader sense, one can also speak of provisioning when losses in the value of assets that may be reversible are recorded. This second conception of the term had more use during the validity of the previous General Accounting Plan, but it is still used in slightly more colloquial language.<\/p>\n

 <\/p>\n

16) Reservations<\/h3>\n

These are figures that belong to own funds. Most come from undistributed profits, although they may come from accounting changes, and may have\u00a0different functions<\/strong>. Among them, voluntary ones stand out, which constitute an important way of applying the results obtained to the financing of the company.<\/p>\n

 <\/p>\n

17) Daily book<\/h3>\n

It's a\u00a0accounting book<\/strong>\u00a0where the\u00a0operations in chronological order<\/strong>. This is a mandatory book. Normally, operations must be recorded day by day, but the law also allows in some cases to group them into longer periods. The journal must go through a process of\u00a0legalization<\/strong>\u00a0in the Commercial Registry that helps guarantee its authenticity.<\/p>\n

 <\/p>\n

The\u00a0improvement of the entrepreneur's accounting culture<\/strong>\u00a0directly translates into an increase in its capabilities\u00a0communication<\/strong>\u00a0with other people and\u00a0comprehension<\/strong>\u00a0the internal and external context in which it must take\u00a0decisions<\/strong>.<\/p>\n

 <\/p>\n

Fountain: SAGE<\/a><\/p>","protected":false},"excerpt":{"rendered":"

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