Every person who is in business, whether big or small knows that, there is a lot to the venture than just exchange of goods and services for money. There are terms and concepts that one need to be familiar with if they are to excel in accounting as far as the business is concerned. They will help you to keep track of your cash inflows and outflows.
The most basic terms in business accounting are credits and debits. These are entries that are made in the general ledger, and for every debit there must be a credit and vice versa. This means that the two must always balance at any given time. To ensure that this is always the case, you can make use of automated accounting systems, which give you a warning when you make erroneous entries, or when there is an out-of-balance entry, prompting you to make adjustments.
Assets and liabilities are other concepts that one is faced with in the daily running of an enterprise. They, to a large extent enable you to calculate how much your venture is worth, and whether it is in for profits or losses. Assets are those things that can be valued in monetary terms, and which are owned by the enterprise. Liabilities on the other hand are those obligations that a company or enterprise owes another and which must be paid for within a given period of time.
Assets and liabilities are captured in the balance sheet, which is divided into several sections. In the process of debiting and crediting the two factors, a debit in the assets will increase their value, while a credit will decrease them. On the other hand, a debit in the liabilities will decrease their value while a credit will increase their value.