The opening balances are the values found on the first day of the financial period. So for example, if your financial year starts on 1 January, the balances at the start of that day in the cash book or the ledgers are the opening balances. Opening balances are usually always exactly the same as the closing balances on the day before.
The difference between income earned and expenses paid. The greater the profit the better for business.
A bill that is due to be paid is called a payable and is included on the list of accounts payable
When a business buys goods or services it is called purchasing.
Anyone in employment who is paid a wage or salary will have their name on the payroll of the business. The bookkeeper in charge of payroll will ensure that all the relevant details of each employee is entered into the payroll program, will process a pay run on a regular basis to calculate how much each employee will be paid, and will make sure the payments happen on time. The bookkeeper or payroll clerk will also ensure that paye is paid to the government.
Short for pay as you earn, which means that individuals who earn wages or salaries have tax deducted from each pay by their employer. The employer is responsible for passing this deduction on to the government, usually on a monthly basis.
A business can keep cash in a safe place for the purpose of making small purchases like milk, stamps, pens etc. The petty cash is monitored carefully by the bookkeeper. All money paid out must be recorded in the petty cash book so that the expenses can be included in the accounts, and when the cash runs low it will be topped up with an injection of more cash.
When a business needs services or parts they can shop around and ask for suppliers to provide a written cost for the parts or services – this is a quote. The business would chose the supplier who provided the best quote. Quotes are usually only valid for a certain time frame – a few weeks or months.
The process of matching one set of figures or documents with another set of figures or documents. For example, matching the cash book with the bank account and investigating and fixing any differences; or checking that the business has received all the invoices listed on a supplier’s statement and if any are missing phoning the supplier for them.
A refund can be provided to or from another business if bills have been overpaid.
An individual who buys something for the business with personal funds can be reimbursed by the business i.e. paid back for that purchase.
Accounts that are due to be paid by the customers of a business are listed on the accounts receivable report. Anything that is receivable means that the business expects to receive money.
When payments are received from customers a receipt can be issued to them to confirm the details of the payment received, particularly useful for cash payments – the receipt provides proof of payment. Also, receipts are what everyone gets when shopping with their bank card and swiping the card through the electronic machine at the shop counter. Businesses should keep these receipts in a folder to match them up to the bank statement ensuring an accurate cash book.
A document that is given to a supplier or received from a customer that lists what invoices are included in a payment made.
A transaction that repeats regularly every week or month for the same amount to the same place is said to be a repeating or recurring transaction.
A number or combination of numbers or letters that are used to identify each transaction within the cash book following through to the journals and ledgers. Each financial transaction is allocated a unique reference that can be traced easily through the bookkeeping system.
S - T
Computer programs that are used to keep the financial data (like Quickbooks, Xero, Sage, MYOB etc. or for processing payroll, or for typing up documents and reports (excel and word).
A bookkeeping system in which all financial transactions only have to be entered once. This is usually within a cash book system and does not utilize journals and ledgers for the process of balancing.
All items or services sold to customers fall within the sales category.
A salary is a fixed amount paid to an employee for their work. People on salaries do not earn overtime pay like a wage earner when working more than their standard hours.
A report that displays financial information. Examples are Income Statement which is another term for Profit and Loss Report, Statement of Account which a supplier of services or goods provides to their customers which details all the invoices issued to them in a certain time frame (like a month), Bank Statement which is a listing of transactions in and out the bank account.
A transfer of funds from one account to another.
A deduction from the income earned by a business or individual. The deduction is paid to the government. The government uses taxes to maintain and run the country.
The allocation of funds from one account to another.
Timebilling is the process of taking data from an employee’s timesheet and charging it onto customers. The data is made up of the hours that the employee spent working on something for the customer, a description of the job and any other costs associated with the job.
U - Z
An asset account in the bookkeeping system in which is entered money that has not yet been deposited to the bank.
A business might receive cash and cheques from several different customers in one day. The bookkeeper can receive these payments against each individual invoice in the bookkeeping system and receive each payment into the un-deposited funds account. The bookkeeper will then total up the payments and write out a deposit slip for the bank with the total and will take that to the bank.
Once the bank has placed it into the account and it shows on the bank statement, the bookkeeper can move it in the bookkeeping system from the un-deposited funds account to the bank account. Some software has the option of clicking on a ‘transfer’ button and some software will require you to process a journal entry for this to take place.
Checks/Cheques that have not been deposited to the bank are said to be unpresented. This term is used most often on bank reconciliations to aid in the reconciling of the cash book with the bank account.
An amount that will not be paid by a customer can be written off. This just means that an entry is made to the accounts to bring the customer’s account down to zero.
A payment made to an employee for the work they do. Wages are usually based on an hourly rate agreed between the employer and employee. Income tax is also usually deducted from the total so the employee receives a net payment. Wages are found on the profit and loss under expenses.
When funds are taken out of a bank account they are ‘withdrawn’.
The financial year-end is always busy for a bookkeeper because this is when the accounts for the year need to be finalized and handed over to an accountant to calculate how much tax a business needs to pay to the government. What the bookkeeper needs to do is ensure all bank reconciliations are completed, all transaction entries are coded correctly, all supporting paperwork is available and all sales taxes and payroll taxes have been processed.
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