Local Bookkeepers: Get Familiar With Common Bookkeeping Terms
Local Bookkeepers | It is important to have a firm grasp of common bookkeeping terms and accounting phrases and terms before starting work as a local bookkeeper. In short, local bookkeepers rely upon certain terms and phrases that they use on a daily basis in tracking and recording financial transactions, whether it be income statements, balance sheets, and accounts payable and receivable. The following are terms that you will need to get familiar with as you use them on a daily basis.
Balance Sheet Terms
Below are a number of items that you will want to be familiar with when dealing with balance sheets:
This is the main financial statement presenting a current picture of your business financial position at a certain date and time. It is known as a balance sheet because the assets owned by your company need to equal all of the claims against the assets.
An asset is everything that your business owns so that it can successfully operate, like buildings, land, cash, tools, vehicles, furniture and equipment.
The term liabilities refers to all debt owned by your business, like loans, bonds and unpaid bills.
This term describes all money invested in your business by the owners. If you have a sole proprietorship, or your company is owned by a small group of people, the equity of the owners is known as a Capital account. For larger businesses, the equity of the owners is in stock shares.
Income Statement Terms
The following are a few terms associated with income statements that you should be familiar with:
This document provides a summary of your financial activity over a certain span of time. It begins with Revenue earned, minus Expenses and Costs of Goods Sold, ending with your bottom line, which is your Net Profit or Loss.
Revenue is all of the money that you have gathered when selling your businesses goods and services.
Costs of Goods Sold
This term refers to all expenditures to buy or make the services and products that you are planning to sell to your customers.
This term describes all money spent to operate your company that does not involve the sale of goods or services.
Other bookkeeping terms include:
In short, accounts Payable refers to all outstanding bills from contractors, vendors, consultants and any other individuals or companies from whom you purchase goods or services.
Used for tracking all customer sales due to store credit.
Used for tracking the use and aging of assets whose value tends to go down with time.
Interest is the money that your business must pay when borrowing money from a banking institution.
Inventory refers to the account tracking all of your products that are being sold to your customers.
The way that your business compensates its employees. Payroll management is a critical bookkeeping function, involving reporting many items to the government, such as information related to unemployment taxes or Workmen’s Compensation.
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