Bookkeeping Lingo Dictionary
Here is a list of the most common bookkeeping terms you might hear from your accountant:
► Accounting: Sorting and entering financial data into an accounting or bookkeeping system.
► Accounting period: Chosen time period for which financial information is being tracked on a regular basis, i.e. monthly, quarterly or yearly.
► Accounts payable: An account that groups all your yet unpaid expenses / bills from other businesses.
► Accounts receivable: An account that groups all your yet unpaid invoices you sent to your clients.
► Assets: Everything your business owns, i.e. property, vehicles, tools, equipment, furniture.
► Balance sheet: A financial snapshot on a selected date and time that’s balancing the assets against the liabilities and equity.
► BAS: Business activity statements for the government that states all taxes that need to be reported and paid.
► Cash flow: It shows how the money moves through the business, where the money came from and what it was spent on.
► Chart of accounts: All accounts in a bookkeeping system for categorising all financial transactions of a business, i.e. equity, assets, liabilities, income, costs of goods sold and expenses.
► Conversion balances: When a new bookkeeping software is set up, the closing balances of the old software are copied to the new software as opening balances.
► Costs of goods sold: The sum of all production or purchasing costs for creating a business’ service or goods to sell.
► Depreciation: With this accounting method, the use and ageing of assets is tracked and calculated: By each year more you use equipment, it’s value decreases.
► Double-entry method: For bookkeeping with this method, all transactions are stated twice, as a debit and as a credit. Both need to be in balance – if not, there’s a bookkeeping error.
► End of month: Usually, the normal bookkeeping cycle occurs monthly.
► EOFY: End of financial year. Lots of bookkeeping and accounting activities need to get done at the end of each financial year.
► Equity: The sum of principle capital investment in the business by the owners.
► Expenses: The sum of all other general spending of the company not directly related to the product or service sales.
► Financial statement: End of the year financial report done by a tax accountant, based on the up-to-date bookkeeping system, showing the financial status of a business and its value. This is also the basis for income tax calculations.
► Income statement: I.e. monthly, quarterly or yearly financial statement showing all financial activities of a business in this period.
► Inventory: All products for sale are tracked in this account.
► Invoice: A document showing the details of a sale of a product or service.
► Journals: All records of daily business transactions are grouped and stored in chronological order.
► Liabilities: All loans, unpaid bills, bonds and different debts your business is owing.
► Ledger: A list of all entries made against the account, both listing credits and debits.
► Nil: A balance that is zero or 0.00.
► Opening balance: The values of your business on the first day of each financial period.
► PAYE: Pay As You Earn. The employer needs to deduct a certain amount of taxes from his employee’s payments to forward it to the government.
► Payroll: Employee payment, including taxes, compensations etc.
► Receipt: Proof of payment.
► Reconciling: The matching of different figures with each other, i.e. credit card statements and the bank account of the business.
► Revenue: All income generated by selling the services or goods of the business.
► Tax: An amount of money that needs to be deducted by the business in order to provide it to the government, i.e. income tax, PAYE or GST.
► Write-off: If it is impossible to obtain an owed amount from a client, this amount is added as a written off entry in order to balance the account.