Accounting terms

Accrual Method of accounting:

A method of bookkeeping that focuses on recording transactions as a company earns income/is obliged to pay expenses. 

Assets:

Anything that is owned. Cash, machinery, investments, inventory, goodwill, trademarks, etc... are all assets. If there is a loan on the asset or it's being used as collateral for another loan, it's still owned by the organization. Assets typically hold a Debit balance. 

Balance Sheet:

An accounting report that lists Assets on one side (that which is owned) and Liabilities (that which is owed) and Equity (the Net Worth of the company) on the other side. It's a snapshot of a company.

 Budget:

A tool used to measure financial health. 

Cash Method of accounting:

A method of bookkeeping that focuses on recording transactions as a company receives and pays out cash. 

Credit:

Amounts listed on the right side of a T account. Liabilities, Equity, and Income accounts are increased by credits.

Debit:

Amounts listed on the left side of a T account. Assets and Expenses accounts are increased by debits.

Equity:

What the company is actually worth (its Assets minus its Liabilities). Equity typically hold a Credit balance. 

Expense:

The amount paid (or obliged to pay) in order to produce income. Expenses typically hold a Debit balance.  

Income:

Typically refers to the earnings associated with the normal course of operations with a business (so for example the selling of a retail item that a store bought wholesale results in income. The selling of a fixed asset, being a capital transaction, is not typically called "income". Assets typically hold a Credit balance.  

Income Statement:

An accounting report that lists Sales/Income and the associated Expenses to generate that income. It shows the activity of the company over a period of time.

Liabilities:

Anything that is owed. Any sort of loan or payment that is legally obliged to be made but hasn't been yet is a liability. Liabilities typically hold a Credit balance.  

Statement of Cash Flows:

An accounting report that reconciles the Accrual Method of Accounting with the cash activity of the company. Like the Income Statement, this shows activity over a period of time. 

T account:

A simple but effective way to organize the activity of a given account into Debits and Credits.