7 Finance Terms & Applications You Should Know Before Starting a Business

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You do not need to have an MBA or be an accountant to create a business plan. However, having a basic understanding of some essential finance terms and applications is always helpful. For example, businesses need tax identification. As a new business owner, you may be required to obtain an Employer Identification Number (EIN). GovDocFiling offers a simplified solution to apply for an EIN online.

Continue reading to learn about seven finance terms used in the world of business.

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  1. Liabilities – Accounts payable, notes payable, debts, and the amount owed to be paid back.
  2. Assets – cash, inventory, accounts receivable, buildings, land, furniture, vehicles, and other things the business owns is known as assets. Usually, assets are something that can be sold. One definition for assets is anything the business owns that has monetary value.
  3. Capital (Equity) – Capital is ownership, investment, stock, retained earnings. To calculate capital, an unbroken rule of accounting is Assets = Liabilities + Capital.
  4. Expenses – Office rent, development payroll, marketing and administrative, internet access, telephone bill, taxes, and interest. Basically, things your company pays for but does not resell.
  5. Bottom Line – Net income and net earnings. Basically, the overall profit.
  6. Sales – Exchanging service or goods for money. The timing of sales is important. Basically, the sale occurs when the service or goods are delivered, regardless of when you are/or was paid.
  7. Cost of Sales – Unit cost, and direct costs: assembly and raw materials cost, the direct cost of delivering the service, costs of finished goods that are then sold. Timing is also important with the cost of sale. This is put into your books at the time the sale is made.

Other Legal Documents

Starting a company means that you have to make sure that all of your legal papers are in order, and you can create, print, and sign all of them online as well. Just search for the document you need, fill it out, and you will receive a copy for your records. Managing your legal paperwork has never been more effortless.

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