Common Terms You Must Know Accounting Firms Ottawa

Accounting Firms Ottawa
Accounting Firms Ottawa

When you work with accounting firms Ottawa, you will come across a lot of accounting terms. It is important to understand these terms in order to maintain healthy financial practices within your business. In this blog, we will go over some of the most common accounting terms that you should know.

Accounting Period

This is the time frame that is used to record financial activity. For businesses, this is typically a year. However, some businesses may opt for a different accounting period, such as a quarter or a month.

Accounts Payable

Accounts payable are the amounts that a business owes to its creditors. This could include suppliers, utilities, or other businesses.

Accounts Receivable

Accounts receivable are the amounts that a business is owe by its customers. This could include invoices that have not yet been paid.

Accrual Basis Accounting

Accrual basis accounting is an accounting method that recognizes revenue and expenses when they are earn or incurre, regardless of when the payment is actually receive or make.

Accruals

An accrual is an expense or revenue that has been incurred or earned, but has not yet been paid or received.

Assets

Assets are anything that a business owns that has value. This could include cash, inventory, property, or equipment.

Balance Sheet

A balance sheet is a financial statement that summarizes a business’s assets, liabilities, and equity at a given point in time.

Capital

Accounting firms in Ottawa refer capital as to the money that is used to finance a business. This could include investments, loans, or savings.

Cash Basis Accounting

It is an accounting method used by accounting firms in Ottawa that only recognizes revenue and expenses when the payment is actually received or made.

Cash Flow

It is the movement of cash that accounting firms in Ottawa consider moving into and out of a business. This could include cash from operating activities, investing activities, or financing activities.

Certified Public Accountant

A certified public accountant (CPA) is a professional who has been licensed by the state to provide accounting services.

Chart of Accounts

A chart of accounts is a list of all the accounts that a business uses to record its financial transactions.

Closing the Books

Closing the books refers to the process of finalizing the financial statements for an accounting period. This could include recording adjusting entries and closing out temporary accounts.

Cost of Goods Sold

The cost of goods sold (COGS) is the cost of the inventory that a business has sold. This could include the cost of the materials, labor, and overhead.

Credit

A credit is an entry on the left side of an account that increases the balance. This could be a customer payment or an investment considering by an accounting firm in Ottawa.

Debit

A debit is an entry on the right side of an account that decreases the balance. This could be a supplier invoice or a expense.

Depreciation

Depreciation is the gradual decrease in the value of an asset over time. This is typically due to wear and tear, obsolescence, or depletion.

Diversification

Diversification is the process of investing in a variety of assets in order to reduce risk. This could include stocks, bonds, and real estate.

Dividends

Dividends are payments that a corporation makes to its shareholders. This could be in the form of cash or stock.

Double-Entry Bookkeeping

Double-entry bookkeeping is an accounting method that records each transaction in two accounts. This helps to ensure accuracy and prevent fraud.

Enrolled Agent

An enrolled agent is a professional who has been license by the IRS to provide tax services.

Equity

Equity is the portion of a business that is own by the shareholders. This could be in the form of common stock or preferred stock.

Fixed Cost

A fixed cost is an expense that does not change with the level of production. This could include rent or insurance.

General Ledger

The general ledger is a record of all the financial transactions of a business. This could include accounts receivable, accounts payable, and inventory.

Generally Accepted Accounting Principles

Generally accepted accounting principles (GAAP) are a set of guidelines that accounting firms in Ottawa use to prepare your financial statements.

Gross Profit

Gross profit is the difference between the revenue and the cost of goods sold. This could be used to measure the profitability of a business.

Income Statement

An income statement is a financial statement that shows the revenue and expenses of a business over a period of time.

Inventory

Inventory is the stock of goods that a business has on hand. This could include raw materials, finished products, or work in progress.

Liability

A liability is an amount that a business owes. This could include debt, accounts payable, or taxes payable.

Liquidity

Liquidity is the ability of a business to pay its debts. This could be measured by the cash flow or the Working Capital Ratio.

Net Profit

Net profit is the difference between the revenue and the expenses. This could be used to measure the profitability of a business.

On Credit

On credit refers to the purchase of goods or services on the promise of future payment. This could be done with a credit card or a loan.

Overhead

Overhead is the indirect expenses of a business. This could include rent, utilities, or insurance.

Payroll

Payroll is the process of paying employees for their work. This could include wages, salaries, or commissions.

Present Value

Present value is the value of an asset at the present time. This could be use to measure the future value of an investment.

Receipt

A receipt is a document that proves that a payment has been made. This could be use to track expenses or income.

Retained Earnings

Retained earnings are the portion of the profits that a business has kept. This could be use to finance future growth or expansion.

Return on Investment

Return on investment (ROI) is a measure of the profitability of an investment. This could be use to compare different investments.

Revenue

Revenue is the amount of money that a business has earned. This could come from sales, services, or interest.

Trial Balance

A trial balance is a list of all the accounts and their balances. Accounting firms in Ottawa use it to prepare the financial statements.

Variable Cost

A variable cost is an expense that changes with the level of production. This could include raw materials or commissions.

Conclusion

These are just a few of the common accounting terms that you should know. Understanding these terms will help you to maintain healthy financial practices within your business. If you have any questions, be sure to ask your accountant or financial advisor.

Hire a Professional Accounting Firm in Ottawa

You can’t afford to take chances with your taxes. The professionals at Tax Eagles have the experience and expertise to ensure that your taxes are filed correctly and on time. We offer a free consultation to discuss your specific needs and tailor our services to meet your individual requirements. Contact Tax Eagles today to schedule your consultation.

LEAVE A REPLY

Please enter your comment!
Please enter your name here