Defining Accounting Terms

Anyone who takes care of a company's books is called a bookkeeper or accountant. This person must understand a certain grouping of terminology in order to do the job well. While there are many accounting terms, here are some of the basics.

Significance

Accounting terms are important to understand as they represent a universal language. The term "account" is known worldwide as a record which represents a sum of monies belonging to a person or company. Defining accounting terms can help anyone in the world communicate any issue dealing with their or another's account.

Function

Five of the most used accounting terms are: 1. Account; 2. Payable; 3. Receivable; 4. Adjusting; 5. Withholding. They deal with money coming in and going out, records being changed and money being held for payment later on an account. When someone looks for a job in accounting, some of the most common types are accounts payable or accounts receivable. Understanding these terms can also help you know what kind of job to look for in the accounting/bookkeeping field.

Considerations

Another very important term in accounting is "asset." This refers to anything of value. This could be a collection of coins, a car or two, a house, etc. Anything that the account holder could sell for money is seen as an asset. With that is another basic term: holder. The holder is the person who owns the account or asset.

Benefits

For some accountants, understanding taxes and the benefits they can offer is very important. Tax season comes with its own slew of accounting terms. If the account holder has debts to specific lenders, such as for school or paying off a house, part of those debts may be tax deductible. A debt is money owed to someone that was borrowed at an earlier time. Something that is deductible is money that cannot be taxed. The more deductibles an account holder has, the lesser amount of money he will owe to the government, whether it be federal or state, during tax season.

Warning

Be forewarned that if you practice accounting and/or bookkeeping without the knowledge of these terms, along with many others, you could seriously mismanage an account up to the point where the company goes broke or you get fired. If you do someone's taxes, for example, and don't understand terms such as withholding, deductible and asset, your account holder may be in for a real shock if an audit comes his way. An audit is a check of the accuracy of past taxes filed. This audit is something every accountant/bookkeeper should be keenly aware of and prepared for.