Accounting Vocabulary
When you learn something new like accounting concepts and terms, it helps to create links between what you know and what you are trying to learn. In some ways, it is like learning a second language and decoding the new word is part of the learning process. For example, trying to translate the Spanish word necesario you might brainstorm with necessary and you would be right. How about blanco? Blanco is like blank which is like white. So, blanco is Spanish for the color white.
Try to make some logical connections about the accounting vocabulary. Take the word - accounting and think about it. Really, the accounting system is a basic counting of what goes on in your business.
Transactions are the business activities, or actions, that build day by day and become your expenses and income. Try to think about the term - transactions. Actions are business activities, and trans means across or thru. These are the basic building blocks of an accounting system. Transactions are to accounting like what raw materials are to a factory, or gasoline is to your engine - the transactions are real and how your accounting system handles them impacts your business.
You must keep a record of your transactions to know how much money your business earned and how much money your business spent. Sounds obvious, right? Ask your bookkeeper or accountant how obvious some transactions are. It can get tricky quickly if you are not clear about what happened in the transaction and how you want it recorded.
In all your business activities, try to think in terms of transactions because once you can identify what transactions occur in your business, you will be able to organize them into a meaningful manner. Right now, take a minute to list what transactions occur in your business each day, week and year. Always thinking in terms of transactions might seem miserly, but it is important to be cost-conscious and honest with yourself about all your transactions. Your success in business depends upon it.
