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Since an accountant deals with money, what comes in and what goes out, what is borrowed, what is credited, what is owed and what is paid, it is not too difficult to realize that they are also dealing with bankruptcy. While we may know of people who have filed for bankruptcy or who have been in that position ourselves, some may not yet know exactly what it is.

Bankruptcy is a legal process that is governed by federal laws and statutes and deals with the debts of an insolvent company or a person who is liquidated after being satisfied with the debtor’s assets, if any remained, of course. Once that entity exits bankruptcy, they are ready to start over, build their credit again, and basically start over.

The bottom line. This is a saying that we hear a lot, day by day. But in accounting terms, the bottom line is actually the bottom line of a financial statement. Shows net income and loss for any period covered by the statement. Now we know.

Earnings and capital expenditures are also in the news. What exactly are they? Well, a capital gain is part of the total gain that has been recognized on the sale of a non-inventory asset. This part of the total profit is not taxed as regular income, hence its name. So a capital expenditure is the payment of money to acquire or improve capital assets. The phrase you need money to make money comes to mind when talking about capital expenditures and profits.

What is a transfer? A transfer is a provision of tax law that allows current losses or certain tax credits to be used on tax returns for future periods. That is, you can keep some of those losses for another tax year instead of putting them all in the year they are earned.

Like the bottom line, a closing entry is as you suggest: it is the last journal entry at the end of an account period. The closing entry is the end and then a new accounting period can begin. The closing entry will clear your temporary account balances and summarize things like expenses and income.

Accountants have to deal with much more than money coming in and out of a business. They are an integral part of any company and people without whom you cannot run a business. From bills to taxes, they do it all.

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