Hi! My name is Ashley Middleton. I am an accountant at Total Solutions and have been here since March 2021. I am originally from Michigan and have a BSBA in accounting from Central Michigan University. My husband and I moved here with our 2 kitties in 2020 and have been loving the Quad Cities. Since I spend a lot of my time focused on accounting, I tend to forget that some of the things I’m talking about with my clients or family don’t make a whole lot of sense to them. So, I figured I should use my guest blog spot to explain some common accounting terms I use on a daily basis. As a guide to both Total Solutions’ clients and my husband 😉
Accounting
Now hopefully this one you are at least a little familiar with but here’s a brief overview of just a few of the things accounting can be. Accounting is a system of recording/summarizing business and financial transactions and then analyzing and reporting those transactions.
Accounts Payable
This is the money that a company owes to its vendors or suppliers who have provided the company with goods or services.
Assets
Assets are typically broken down into fixed and current assets. Fixed assets are resources for long terms use and are typically a purchase greater than $500 for most small businesses. Current assets can be liquidated quickly and used for a company’s immediate needs.
Balance Sheet
This is a summary of the financial balances of an organization at a specific point in time.
Cash Flow
Cash flow is revenues and expenses expected to be generated through business activities like sales or manufacturing over a specified period.
Costs of Goods Sold
Cost of Goods Sold or COGS refers to the direct costs incurred from producing the goods that are sold by a business. Including materials and labor directly used to create the good.
Expenses
There are four main types of expenses or costs a business may incur through its operations
- Fixed Expenses – things like rent that happen n a regular basis
- Variable Expenses – these could be labor costs, that can change within different time periods
- Accrued Expenses – these are expenses that have been incurred but not paid
- Operation Expenses – things like advertising costs, or property taxes that are not directly associated with the production of goods or services
Equity
In accounting terms, this is the amount of money a company’s owner has put into it or owns.
Liabilities
Liabilities are a business’s debts or financial obligations that it incurred during business operations.
Return on Investment (ROI)
While this is not solely used for accounting this is a measure to evaluate the financial performance relative to the amount of money that was invested.
And there you have it! My list of common accounting terms and explanations. Hopefully, this helps anyone who is feeling a bit confused by anything accounting related. Of course, if this still feels like too much to handle, the Total Solutions accounting team would love to help!
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