Basic Accounting Terms Explained

It is important to understand the basic accounting terms as a business owner or someone who is moving up in a business. Continue reading to discover the top accounting terms that will be essential to understand to effectively communicate with your accounting service provider. Please continue reading and speak with our knowledgeable New Jersey Certified Public Accountants to learn more about these accounting terms and how you may utilize them. We would be happy to assist you with any further questions.


Assets can be anywhere from cash and investments to buildings and property. Assets are the wealth that has been accumulated by a business. Assets are owned outright without lien or loan. Other examples of assets include warehouse inventory, equipment, and supplies.


Loss is defined as when a product or service sells for less than it costs to supply or manufacture. Loss also refers to when expenses have exceeded the revenues of assets.

Gross Margin

Gross margin is also referred to as profit. This is the total number of sales that have been made that is subtracted by the associated costs. This can include wholesale costs, materials, supplies, and manufacturing costs.


Revenue can also be referred to as income. These two terms are interchangeable and are defined as compromising the total amount of all income collected at one point in time. This differs from receipts and can be included in monies that are not collected at the delivery time. It may include credit purchases, subscription fees, interest incomes, and cash sales.


Receipts are the total amount of cash collected by a business in transactions over the course of one workday. This does not include other revenue collected.

General Ledger

The general ledger records all transactions including credit purchases, office expenses, income losses, and sales. The general ledger is the side of the bookkeeping ledger that contains the balance sheets and the income statement accounts.

Balance Sheet

The balance sheet records all basic accounting formulas of assets stockholder equity, liabilities, and capital either monthly, yearly, or quarterly. This is used to discover the financial health of the business.

Trial Balance

The trial balance includes both debits and credits for a single account and is recorded in the general ledger.

Trade Discount

A trade discount is based on the volume of goods and is a percentage discounted from the purchase price. Higher discounts will be applicable for larger orders.

If you have any further questions regarding these terms, give our Certifed Public Accountant firm a call to learn more about our services and how we can assist you.

Contact our experienced New Jersey firm

Werdann DeVito LLC is an experienced Certified Public Accountant firm serving clients throughout New Jersey with all of their financial needs. If you need quality assistance with accounting, tax, or consulting services, contact Werdann DeVito LLC today.