Financial Terms 101 for Small Business Owners, Part 1

September 26, 2019 by OSYB Staff

So you have your own business and you have consulted or hired financial professionals to manage your business accounting. That’s great but it is always important for you to have some basic understanding of your company’s financial picture at all times. Intuit QuickBooks shares a glossary of terms that small business owners should be well-acquainted with. Here are some for starters:

• Assets are everything your company owns that has some economic value. There are 6 types of assets:
  • Current or liquid assets – anything that can be easily converted into cash such as stock holdings
  • Fixed assets or long-term assets – anything not easily converted into cash and requiring time and complex procedures to liquidate such as real estate
  • Tangible assets – anything that you can see or touch; includes current or fixed assets
  • Intangible assets – anything that is not tangible such as patents or trademarks
  • Operating assets – anything needed for the day-to -day functioning of the business and includes fixed and current assets, as well as tangible and intangible assets such as cash and operating machinery
  • Non- operating assets – anything that is not vital to the company yet provides a product or service necessary to establish and run a business such as brands
• Liabilities are anything that the company is responsible for by law such as bank loans or credit card debt.
  • Current liabilities – with an expected repayment within a year such as money owed to suppliers
  • Non-current liabilities – with expected repayment of more than a year such as mortgages
• Balance Sheet is a document that subtracts your company’s total liabilities from its total assets in order to arrive at your company’s net worth.
• Expenses, according to Section 162 of the Internal Revenue Code (IRC), business expenses are any cost that is “ordinary and necessary” to run a business or trade.
• Accounts receivable is the amount that a business expects to receive from clients.

***

For full article: What are assets? Ten financial terms for small business owners

Image Credit: Deposit Photos