Tuesday, 30 Jan 2024
Entrepreneurs taking up the responsibility for the first time must deal with many surprises. One of the most significant ones is that they need to make sense of the financial data the bookkeepers offer them. Although the professionals offer valuable insights and make the reports comprehensible, the business owner must have some financial understanding to absorb the information.
Financial literacy is a must-have skill for business owners because it helps them make decisions that do not affect their profitability. They should be able to read the financial reports and identify the patterns to know how their venture is performing and how it can be improved. So, here is a list of the common bookkeeping terms every entrepreneur must know. It will eliminate the chances of misunderstanding and confusion.
It is the money owed to suppliers for stock and equipment bought for the business. They are short-term unpaid bills and are known as liability or debt.
It is the money that the customers owe to the business for the products and services bought from it. They are mentioned as assets in the balance sheet.
The accrual accounting system wherein the transactions are recorded when they occur rather than waiting for the cash to be credited to the account.
Tangible and intangible items owned by the business are known as assets, such as commercial property, vehicles, equipment, goodwill and intellectual property.
It is a financial statement that provides a list of assets, liabilities and equity of the business in a given period.
Businesses registered for Goods and Services Tax have to lodge the statement to report on taxes and make the payments.
It is a common practice undertaken by bookkeepers in Melbourne and requires comparing bank statements with financial records to identify errors.
It is the point where the income generated by the business equals its expenses.
It is the profit made on selling assets owned by the business.
It is used to measure the amount of cash coming in and going out of the business.
It is the total cost of producing and selling the goods.
A credit is offered to the customer when they agree to pay for the bought goods at a later date.
An entry made by Melbourne bookkeepers in the balance sheet that increases assets or decreases liabilities.
The decline in the value of assets owned by the business is the depreciation of assets.
The payment made to shareholders from the income the business generates is known as dividends.
It is a bookkeeping method that records every transaction in two accounts – credit and debit.
It provides the financial standing of the business and is calculated by subtracting liabilities from assets.
It is the non-monetary perk offered by the employer to employees, such as a company vehicle or mobile phone.
It is the amount owed by the business, such as unpaid invoices and loans.
It is a loan agreement with the bank that allows the business owner to borrow money every year up to a limit.
It is the closing down of the business by selling its assets to pay off its debts.
It is the difference between the selling price and the cost price of the goods sold by the business.
Employers withhold tax from the payments made to the employees and send it to the ATO, which labels it as PAYG Withholding.
It is the cash used by the business for insignificant expenses like coffee.
It is a financial statement prepared by bookkeepers in Melbourne that provides a list of all the costs, expenses and revenues generated by the business. It is also known as the income statement.
A receipt is a document that proves the purchase of a product by the customer.
It is the net profit generated through an investment.
It is the amount of capital generated through business operations over a specific period. It is mentioned in the income statement by Melbourne bookkeepers.
It is a cash-based bookkeeping method that involves recording the transaction only once in the journal.
Superannuation or super is a savings program for employees to create a retirement fund with the help of regular payments made by the employer during their tenure in the organisation.
It is required for claiming GST credits and is prepared to showcase the inclusion of GST in the cost of goods sold to customers.
It is the gross revenue and is represented as the total amount generated through sales during a specific period.
It is the cost that keeps changing based on the number of goods sold and their demand in the marketplace.
Business owners must hone their financial skills before entering the field of entrepreneurship to avoid making costly mistakes. The list above will prove helpful in remembering the commonly used terms and understanding the bookkeeper effectively.
