Keyterms in accounting

Accountancy or accounting is the art of communicating financial information about a business entity to users such as shareholders and managers.

Accounts Payable
Debt a company must pay off within the year. It reprezents a current liability. Typically, these debts are to the companys suppliers. The accounts payable amount is subtracted from the sales or revenue amount on a balance sheet when net income and net worth are calculated.

Accounts Receivable Money owed to a company by its customers; it qualifies as a current asset because the company expects the money to be paid to it within the year. Investors often look at this number to see whether accounts receivable is an unusually large number in comparison to the companys sales. If it is, it may mean that the company is low on cash.

The Cash Flow Statement - is one of the main financial statements that shows actual cash inflows and outflows by operating, investing, and financing activities for the reporting period. Chart of Accounts lists every general ledger account name and account number that a business uses in its Accounting System. It categorizes each account into five major groups: Asset Accounts, Liability Accounts, Equity Accounts, Revenue and Gain Accounts, and Expense and Loss Accounts.

Balance Sheet
What is it? An official financial statement that includes a companys assets (things it owns, such as cash, capital equipment, and investments) and liabilities (things it owes such as accounts payable and long-term debt). To determine a companys net worth, you subtract its liabilities from its assets. You can use a companys balance sheet to determine its financial health.

Assets are things you own, such as cash, real estate, stocks, and bonds. In the case of a business, assets also include inventory. On a balance sheet, assets contribute to the positive side, and liabilities contribute to the negative side. For example, if you own a $100,000 house with a $60,000 mortage, you would have $40,000 of the houses equity on the assets side of your balance sheet, because you own that portion of the house; the $60,000 would appear on the liabilities side of your balance sheet because you owe that amount to your mortgage lender.

Assets

Capital Assets
Also called fixed assets. Tangible items used in the operation of a business but not consumed in the course of those operations. (Some examples of capital assets are the companys buildings or the machinery with which a product is made.) For tax purposes, capital assets may also include the security investments (securities) of a business.

Amortization The allocation of costs (for a plant or equipment, for instance) over the useful life of an asset. Companies can use various forms of accepted accounting practices to allocate the costs of assets over a certain time period.

Earnings A corporations profits. An earnings report is a statement a company issues to shareholders and to the public declaring its current profits on either a quarterly or annual basis. Revenue or revenues is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. Some companies also receive revenue from interest, dividends or royalties paid to them by other companies.

Income is the consumption and savings

opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms.

"income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received. For firms, income generally refers to netprofit: what remains of revenue after expenses have been subtracted. In the field of public economics, it may refer to the accumulation of both monetary and non-monetary consumption ability, the former being used as a proxy for total income.

For households and individuals,

Equity Ownership. When you own part of something, you have equity in it. So, for example, when you own 3,000 shares of Company Xs stock, that is your equity in the corporation. In other words, you and other shareholders own a piece of the corporation. In the case of real estate, your home equity equals your down payment plus any principal youve paid on your mortgage.

Inflation
A rise in the price of commodities and services. Inflation occurs when spending increases faster than supply. Moderate inflation is an expected result of economic growth.

Deflation
The opposite of inflation, deflation occurs when consumer prices fall. Mild deflation, just like mild inflation, can be good for the economy. A severe deflation, however, can be devastating. Assets, such as real estate and stocks, decline in value along with consumer prices. People feel less wealthy and spend less money. Eventually, the economy can spiral into a depression.

Top 3 nations with highest inflation

1.

Zimbabwe: 355,000% The inflation in Zimbabwe for the month of March 2008 rose to 355,000%. It more than doubled from the February figure of 165,000%. A sausage sandwich sells for Zimbabwean $50 million. A 15-kg bag of potatoes cost Zimbabwean $260 million. But then, Zimbabwean $50 million is roughly equal to 1 US$.

2. Iraq: 53.2%

War-torn Iraq is also facing a huge problem, not only on the political front but also on the economic one. Rising oil prices, political instability, terrorism and the other post-conflict dynamics have led to inflation in the nation rise to unmanageable proportions

3. Guinea: 30.9% Guinea is also one of the world's poorest countries. Although blessed with rich mineral wealth - with huge iron ore, gold and diamond deposits - Guinea has been languishing as one of the poorest nations on earth with largescale unemployment, lack of industry and poor infrastructure.