Whenever it is that time of the year to file your taxes, most Canadian individuals and business owners begin to feel stressed out. This is due to the fact that although their accountant is the one who handles the filing and organizing of their financial statements – there are basic accounting terms that they do not know the meaning of.
Every year, otherwise savvy business owners nod their heads in agreement & understanding as their accountants go through complex financial statements while 95% of what’s being said sails over their heads.
This can make it difficult to fully process what your accountant is saying, ultimately leaving you lost in jargon and uncertain as to where your business actually stands. According to long standing Edmonton Accounting Firm Liu & Associates, “Small business owners would be wise to educate themselves in some basic financial and accounting principles”.
Back to Basics: Accounting
First, there is the term accounting itself, which refers to the general process of monitoring the ins and outs of your finances. For this, you need to have a rough draft of the major purchases that you have made within the year, and the total income which came into the household or business.
If you are a business owner who does not usually handle the financial aspect of running the company, you need to learn about the balance sheet. This is a financial statement which indicates the assets and liabilities of your business, as well as its equity and net worth.
Assets refer to a tangible or intangible property which provides a beneficial value to an individual or business owner.
Conversely, a liability refers to the debt or other financial obligations that you owe to a creditor.
Now that you have an overview of the basic terms involved in the accounting business, you will have a better time understanding your accountant when the time to file your taxes comes next year.