Have you ever come across bookkeeping jargon that didn’t make any sense? The aim of our bookkeeping basics blog is to answer your questions and assist you throughout your small business journey – it’s an exciting time and we would love to support you along the way! Although we recommend outsourcing bookkeeping services, if you’re self-managing your books through small business bookkeeping, here’s our list of most commonly used bookkeeping terms with explanations of each.
Accounting period: The time period for which financial information is being tracked. Most businesses track their financial results on a monthly basis; in this case each accounting period would equal one month.
Accounts payable: The amount owed by a business to its suppliers or vendors for goods and services purchased on credit.
Accounts receivable: The amounts owed to a business from its customers or clients for goods or services provided on credit.
Assets: All of the items a company owns in order to successfully run its business. This could include buildings, tools, equipment, land, furniture, vehicles, etc.
Auditors: third party accountants who review an entity’s financial statements for accuracy and provide a statement.
Balance sheet: This is a financial statement that presents a snapshot of the company’s financial position at particular date. It is called a balance sheet because the assets must equal the liabilities and equity (see below!)
BAS: Business Activity Statement. If you are a business registered for GST you need to lodge BAS. Your BAS will help you report and pay your GST, PAYG instalments, PAYG withholding tax and other taxes. Bookkeeping services will lodge BAS for you.
Bookkeeping Software: There is a range of bookkeeping software available but it’s important to know which will best suit your business from day one; whether it be xero bookkeeping & xero cashbook, MYOB bookkeeping or QBO. Your bookkeeper can help with this decision!
Break-even Point: The point in a business’s operations where revenue is sufficient to cover expenses.
Chart of Accounts: The set of accounts used by a business that make up its general ledger. These accounts are standard to that organization.
Depreciation: An accounting method used to track the aging and use of assets.
Double-Entry Bookkeeping: A system in which every transaction has a corresponding positive and negative entry (debits and credits).
Equity: All of the money invested in the company by its owners.
Expenses: Money spent to operate the company that is not directly related to the sale of individual goods or services.
General Ledger: Where all the company’s accounts are summarized.
Income statement: The financial statement that presents a summary of the company’s financial activity over a certain period of time (i.e. a month, quarter, year).
Journals: Where bookkeepers keep records of daily company transactions. Each of the most active accounts, including accounts payable, and accounts receivable has its own journal.
Liabilities: Debts that the company owes. This could be loans and/or unpaid bills.
Payroll: Managing payroll is often a key function of a bookkeeper and involves reporting aspects of payroll to the government.
Revenue: All money collected in the process of selling a company’s goods and services. Revenue can also be collected by selling assets the business no longer needs.
Finally, let’s define the biggest question of all.
What is bookkeeping?
A bookkeeper will organise all the financial record-keeping that you may not have the time or knowledge to do properly. They can also provide insight into potential financial issues in the business.
Even if you are several years behind on your bookkeeping, a bookkeeper can get your business back on track and provide training to ensure it stays that way. Your bookkeeper will also prepare & lodge BAS, organise payroll, they can practise double entry bookkeeping and sort your superannuation; whatever your business might need.
If you think your business might benefit from bookkeeping services; if you need a software health check, training or assistance setting up your books, please don’t hesitate to get in touch; we’ll discuss your business needs and tailor a package that sets you up correctly from day one.