Ask yourself, do you understand money and finances? Did you know there are over 400 terms used in the Accounting/Bookkeeping field? If you answered no to either of the questions, you are not alone.
In 2014, The Atlantic Daily published an article called “Most People in the World Have No Idea How to Manage Their Money”, only 30% of American’s could pass a simple three question finance survey (click here to take their survey).
Does this surprise me? No. Accounting can be intimidating. Many people feel they are bad at math and can’t do it. I beg to differ. To me, it is a matter of helping a person better understand the accounting language.
Today, I’d like to share four accounting definitions and examples of assets, expenses, liabilities, and revenues. In addition, provide the accounts normal balance and how to properly adjust the account balance.
Definitions:
- Asset: Resource(s) that have monetary value.
- Examples of assets are: Cash, inventory, property & equipment.
- Expense: An expense for a company or freelancers operating activities during a specified accounting period.
- Examples of expenses: Utilities, professional fees, and auto expenses.
- Liability: An amount owed by a person or company to another person or company, and typically has the word “payable” in the account title.
- Examples of liabilities are: Accounts payable, payroll taxes payable, and sales tax payable.
- Revenue: Revenues are amounts a company or freelancer earns from selling goods or providing services to clients.
- Examples of revenue are: Sales or service, interest income, and fees earned.
Account balances:
