Hey! Welcome to our Financial English Series. We understand some of these terms are tricky. Can you explain all financial vocabulary with your own words?
Let us help you with a few every week. We begin with the following concepts:
- accounting period
- accounts payable
- accounts receivable
- accrual basis
- accrued expenses
Account | a record of financial transactions; usually refers to a specific category or type, such as travel expense account or purchase account.
Accountant | a person who trained to prepare and maintain financial records. Accounting ‐‐ a system for keeping score in business, using dollars.
Accounting period |the period of time over which profits are calculated. Normal accounting periods are months, quarters, and years (fiscal or calendar).
Accounts payable | amounts owed by the company for the goods or services it has purchased from outside suppliers.
Accounts receivable | amounts owed to the company by its customers.
Accrual basis, system, or method | an accounting system that records revenues and expenses at the time the transaction occurs, not at the time cash changes hands. If you buy a coat and charge it, the store records or accrues the sale when you walk out with the coat, not when you pay your bill. Cash basis accounting is used by individuals. Accrual basis accounting is used by most businesses.
Accrued expenses, accruals | an expense which has been incurred but not yet paid for. Salaries are a good example. Employees earn or accrue salaries each hour they work. The salaries continue to accrue until payday when the accrued expense of the salaries is eliminated.
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