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Business accounting involves measuring and analyzing all of a company's financial data. If you own a business, working with experienced professionals can help you streamline this process and make better monetary decisions. Even if you don’t handle your own accounting, it’s beneficial to know the basic terms so you can communicate effectively with your team. 

A Guide to Popular Business Accounting Terms

1. Revenue

Revenue includes any income received by a business from its normal activities. This may include product sales, payments from services, royalties, or dividends. The term is often used to describe total revenues from a year but may also be used to chronicle earnings from a more specific time frame—like the weeks following a product launch.

2. Cash Flow

business accounting

Cash flow describes all money coming in and going out of business accounts. It also includes the timing of those payments; this aspect is important because positive cash flow means you don’t owe funds to vendors before receiving the money needed from customers or clients. 

You can review the figures from the past month or year to predict how the business will fare each year. You can also forecast cash flow based on projected payments and bills.

3. Gross & Net Profits

Profit is a general term for the money a business earns after expenses. Gross profits look at the amount earned from a product or service after subtracting costs directly related to it, like supplies used to produce a product or perform a job. Net profit takes a broader view and looks at the total income after all expenses are paid, including indirect items like marketing.

4. Balance Sheet

A balance sheet is a statement that includes a company’s assets, liabilities, and ownership equity. Assets include factors like cash, equipment, and real estate. Liabilities cover debts, and ownership equity is the number of assets the owner can claim. This sheet is generally used to determine the value of a business.

5. Income Statement

An income statement includes a company’s profits or losses over a stated time period. It should include all revenues earned and any expenses paid during that period. These are usually produced quarterly and help business owners analyze the company's financial trends. 

 

If you’re looking for business accounting help, turn to the team at AVK Global Bookkeeping in Laveen Village, AZ. The company provides bookkeeping, consulting, and payroll services to businesses throughout Phoenix, Glendale, Chandler, Gilbert, Tempe, and Maricopa. Their experienced advisors offer friendly and organized services customized to each client’s needs. Visit their website to learn more, or call (602) 935-5728 to request a consultation.

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