The 4 Most Commonly Used Accounting Terms

The 4 Most Commonly Used Accounting Terms



There are so many terms used in Accounts. Before we discuss how these terms affect a business, it is necessary to understand what each one means. Some examples are the income statement, balance sheet, general ledger, and depreciation. Then, we can use those terms to analyze the financial health of a company. These terms are often confusing and you should take the time to learn about them before trying to interpret them on your own. Visit this site to get a list of the best accounting companies in Abu Dhabi.

Balance sheet:

A balance sheet is a document that lists the assets and liabilities of a business. These assets are paid for with borrowed money from investors, and the liabilities are paid with retained earnings. The balance sheet is closely linked with other financial statements. For example, a truck owned by a business will appear as an asset, but a loan on that same truck will appear as a liability.

Income statement:

An income statement is a type of financial statement that shows how much a company has earned. It is often referred to as a profit and loss account. The income statement shows how much a company made as well as how much it spent on its products and services. This is important when it comes to analyzing a company’s financial situation and determining its profitability.

General ledger:

General ledger accounting is a way to record all of a business’s financial transactions. It includes the account number, date, amount, and description of each transaction. Using accounting software is a great way to keep track of journal entries and maintain tight general ledger accounting records. A general ledger is also used to track income and expense reports. While these are temporary accounts, they are added to the balance sheet at the end of the accounting period to show the net balance of each account.


Depreciation is a key part of a business’s accounting, but it has more than one meaning. It can refer to a variety of situations, including the purchase of a piece of equipment or a vehicle. For example, an organization might purchase a truck for DH 50,000, expect to use it for five years, and then charge a depreciation expense of DH 10,000 in each of those five years. Another method is called accelerated depreciation, which reduces reported income early in the asset’s life. This method also addresses the actual use of the asset and relates to the amount of production the asset makes.