With accounting, a good way to explain what it means would be this example, a company's accountants periodically measure the profit and loss for a month, a quarter or a fiscal year and publish these results in a statement of profit and loss that's called an income statement. These statements include elements such as accounts receivable (what's owed to the company) and accounts payable (what the company owes). It can also get pretty complicated with subjects like retained earnings and accelerated depreciation.
Much of accounting though is also concerned with basic bookkeeping. This is the process that records every transaction; every bill paid, every dime owed, every dollar and cent spent and accumulated.
In what's called double-entry bookkeeping, the liabilities are summarized. And obviously a company wants to show a higher amount of assets to offset the liabilities and show a profit. The management of these two elements is the essence of accounting. There is a system for doing this; not every company or individual can devise their own systems for accounting; the result would be chaos!
Personal accounting
If you have a checking account, of course you balance it periodically to account for any differences between what's in your statement and what you wrote down for checks and deposits. Many people do it once a month when their statement is mailed to them, but with the advent of online banking, you can do it daily if you're the sort whose banking tends to get away from them.
Income - any money you've earned from working or owning assets, unless there are specific exemptions from income tax.
Personal exemptions - this is a certain amount of income that is excused from tax, and taxable income - This is the balance of income that's subject to taxes after personal exemptions and deductions are factored in. So you should understand all the basic meanings of certain terms in accounting.
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