The Young Entrepreneur's Glossary

young entrepreneurs glossaryWritten by Eddy Hood

Working as an entrepreneur can be a satisfying way to earn money, but anyone preparing to start a small business or test the waters as a new entrepreneur will need a firm grasp of the terms and vocabulary that are used daily in the business world. Knowing these professional terms will help you present yourself as a knowledgeable expert in your field and understand the ins and outs of managing your business. Whether you choose to outsource some of the aspects of running a small business, such accounting and tax preparation, or you plan to do it yourself, you'll need to know and understand these terms.

Account Payable: An account payable is a claim that is owed to a creditor to pay for goods or services received.

Account Receivable: An account receivable is a claim for an uncollected amount against a debtor for a completed transaction.

Acquisition: When a company takes over the controlling interest of another company, this is an acquisition.

Adjusted Gross Income: Adjusted gross income is take-home income, which is reduced by specified expenses such as federal and state taxes. It's a key figure when filing income taxes.

Asset: An asset is a tangible or intangible object that has an economic value that will benefit a business.

Bankruptcy: Filing for bankruptcy is a legal process in which debts are liquidated after using the debtor's assets to satisfy as many debts as possible.

Business Valuation: A business valuation is an estimate of the total value of the company and its assets.

Collateral: Collateral includes assets that are pledged to a creditor to secure a loan.

Creditor: A creditor is the party that loans money or sells another type of asset to someone else.

Debt: A debt represents an amount owed, and it might consist of goods, services, bonds, notes, or money.

Deficit: A deficit occurs if there is more debt than resources to cover that debt.

Earned Income: Earned income includes fees, wages, salaries, and other funds earned as compensation for providing a service or goods.

Exemption: An exemption is a portion of a taxpayer's income that isn't taxed. All taxpayers qualify for at least one exemption unless someone else claims them as a dependent on a tax return.

Expense: An expense is an amount spent on a service or item to use for a specific purpose.

Fiscal Year: A fiscal year is a 12-month period that makes up an entity's accounting period. Fiscal years don't necessarily correspond with calendar years.

Fixed Costs: Fixed costs are costs that stay constant within a specific time period or range of activity.

General Journal: A general journal is a flexible and simple type of journal.

In Arrears: If something is noted as in arrears, it hasn't been paid at the agreed time and is overdue.

Independent Contractor: An independent contractor is a person who offers services to the public. Someone contracting with an independent contractor for a service or goods has the right to control or direct only the result of the work performed, not the methods used to accomplish the end result.

Joint Venture: A joint venture is a legal entity that is created by two or more businesses that join together for a specific enterprise. Both parties share profits and losses.

Line of Credit: A line of credit is a loan for which the borrower pays interest only on the amount borrowed, making periodic payments to pay back the balance.

Merger: A merger is the joining together of two corporations. With a legal merger, the two formerly separate businesses dissolve and move all assets and liabilities into the new business entity.

Outsourcing: Outsourcing involves purchasing services or goods from outside companies, which may include accounting, tax preparation, payroll services, or advertising.

Sales: Sales include the exchange of a product or service for payment. Companies may also have a sales department or sales representatives who work to increase the number of products or services sold.

Venture Capital: Venture capital is a type of financing that involves a business giving up a percentage of its ownership and control in exchange for funding. Venture capital agreements have a specific time frame.

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