All financial transactions input to the bookkeeping system are called entries.
This is found on the balance sheet and it shows how much the business owner has contributed to the business from personal funds (capital) and how much he has withdrawn from the business for personal use (drawings). Another terms for this section is called the Current Account.
Most purchases made by a business are called an expense. Expenses are found on the profit and loss report and can be used to reduce the amount of tax owed to the government.
Most accounting software programs allow the bookkeeper to export information to excel or pdf for various uses.
1) In many cases it is possible to export creditor payments from the software and upload directly to the bank for payment so that the account and details do not have to be manually entered into the bank – a real time saver if you have a lot of bills to pay.
2) The export of financial data to excel allows flexibility for developing financial reports based on the bookkeeper’s preference rather than being stuck with the parameters set by the software.
End of Month:
The bookkeeping cycle is usually based on one month, every month. At the end of the month, there are various steps a bookkeeper needs to take to close off the month, such as :-
Reconciling the bank account to the last day of the month,
making sure all sales have been issued on invoice to customers,
checking that all supplier invoices dated to the last day of the month are entered into the system,
performing various checks on the various bookkeeping accounts to ensure information has been coded to the right place and all is balancing,
making sure the various sales tax and paye tax has been calculated and reported and paid to the government.
Depending on the size of the business, it can take a bookkeeper several weeks into the following month to get the previous month finalized and closed off, after which no changes should be made other than with journals in the current month.
The money or value of money involved in all business transactions within the business or at the bank.
Reports that are produced by a tax accountant at the end of the financial year based on all the data entered to the bookkeeping system by the bookkeeper. These reports indicate how well the business is or is not doing, what the business is worth, and are used to calculate income tax due to be paid to the government.
Filing is the process of putting away documents in a systematic method. Also, when a bookkeeper says “I am filing the sales tax” they mean they are sending a report to the government on how much sales tax the business has to pay for the month, or “I am filing the paye” they mean they are sending a report to the government showing how much payroll tax is due for payment by the business.
The physical or digital place in which a business puts all its documents in a specialized method.
G - I
Gains and Losses
This usually comes up when there are foreign currency transactions to be dealt with. When a business is given an invoice by an overseas supplier in a foreign currency, it has to be converted into the local currency when being entered into the accounts. When it is time to make the payment the local currency has to be converted into the foreign currency by the bank.
The date at which it is entered will have a different exchange rate to the date when it is paid because exchange rates fluctuate on a daily basis.
These different exchange rates cause financial gains or losses that need to be identified in the accounts.
The gains occur when the business has to pay less to the supplier than the original conversion;
The losses occur when the business has to pay more to the supplier than the original conversion.
This is calculated by taking the business income and deducting the cost of sales. If the cost of sales is more than the income a Gross Loss results.
Buying equipment such as a computer by paying it off through a finance company. At the end of the lease period the business will have the option of making a final payment to own it, or they can return the equipment and upgrade to a newer model. The new model can be paid off through the finance company, so the whole process starts again.
The term used for entering data into the bookkeeping software.
A document that details the sale or purchase of stock, parts or services. The invoice will show the main details such as date, invoice number, quantity, description, cost, total, payment terms. When a business buys the products or services it will receive a purchase invoice and when the business sells products or services it will provide a sales invoice to the customer.
Money that is earned by a business through the sale of products or services.
A list of items that a business buys and sells. These items are kept in a store room of some sorts and a strict record kept of the number of items on hand at any given time.
Data brought into the bookkeeping records through a digital import. This could include bank transactions which can be downloaded from the bank in a special format such as CSV, or it could be contact names and addresses from another program such as excel.
Import can also mean to bring into the country stock purchased overseas.
Financial statements can be produced for a bank or loan company at any stage during the financial year but because the financial year has not ended yet they will be called interim reports because they are based on a shorter period than the full year. Banks or loan companies usually require these so they can see how the business is doing before approving a loan to the company – they want to be sure the business has the means to pay back a loan. Interim reports are usually sufficient for this purpose.
J - L
An entry that is made into the accounts utilizing double entry bookkeeping to make an adjustment to the accounts such as if a correction has to be made. The journal describes which account is being debited and which account is being credited, the date, the reason for the journal and a reference.
Each account on the chart of accounts has a ledger page. The ledger page lists all the entries made against the account either as a debit or a credit. The ledger page is totaled at the end of every month.
This is found on the balance sheet. Liabilities are made up of debts that the company owes to other businesses and includes accounts payable, loans and credit card balances
A loss occurs when the gross profit of a business is less than the expenses the business has to pay to keep the business running. This is usually called a Net Loss.
A business can buy asset with a loan from a bank or finance company. Loans are recorded as a liability in the balance sheet
M - N
When a business buys stock to sell they usually increase the price before selling it. This is called a markup. So if Betty buys a bag for $10 and sells it for $15 her markup is $5. Markups are calculated either as a percentage of the price it cost to buy it, or set as a fixed calculation such as doubling the cost price.
Margins are calculated as percentages. One example is the gross profit margin which is based on sales divided by gross profit and the result turned into a percentage. Businesses can chose what margins they should have to be able to earn a profit and based on those margins decide what prices to sell their products to make this happen.
A balance that is zero or 0.00 is said to be a nil balance
The result after taking expenses away from the Gross Profit or Loss.