Accounting and Finance Definitions

Professions are notorious for the use of jargon and accounting and finance are no different. With this website we hope to clear away at least some of this confusion. Set out below are explanation of basic accounting concepts that we hope will help you along this learning path.

  Assets
  Something that is owned or at least controlled by the firm that has already taken place and from which it expects to receive cash or some other economic benefit. Assets are disclosed on the statement of financial position.
  Drawings
  The reduction in owners contributions or capital as a result of making a specific withdrawal of funds from the business. Drawings are reflected in the statement of financial position.
  Expenses
  The outflow of money or some other form of economic benefit to a third party, excluding distributions of owners capital, that has already happened and results in the reduction in assets and/or increase in liabilities. Expenses are disclosed in the statement of financial performance.
  Income
  Money or some other economic benefit that a firm receives control over as a result of an event that has already happened and increases its balance of assets or reduces its balance of liabilities. Income is disclosed in the statement of financial performance.
  Liabilities
  Debts or loans or other forms of financial arrangements that create an obligation on the firm to repay another party. For the debt to be recognized on the firm’s statement of financial position it must have already taken place and its repayment will be in the form cash or some other outflow of economic benefits leaving the firm.
  Statement of Financial Performance
  A summary of the income, expenses and resulting profit of the business over a set period of time.
  Statement of Financial Position
  A snap-shot of the assets, liabilities and equity of a business at a particular point in time.