Bookkeeping - Terminology Made Simple

By Vikki Allen
There is no mystery to the basis of bookkeeping ie: for every debit there must be corresponding credits, but which is what and where does it go?

Lets first un-mystify some of the terminology and in future articles we can get down to practicalities.

INCOME -

This can be broken down into 2 groups,

1. Sales - This is the money generated from the sale of goods or services before taking anything off for costs or discounts etc.
2. Other Income - This is any other money received into the business by way of interest, discounts or anything not directly related to the product or service of the enterprise.

EXPENDITURE (Expenses) -

Again this can be broken down into 2 groups,

1. Cost of Sales - anything directly purchased, including labour (wages), to produce the stuff you sell.
2. Expenses - everything else you have to pay for to run the business.
Example: Say the business makes wooden boxes, the wood you buy and the carpenters wages are direct costs but the electricity used and the paper used for invoices are not. They are more like support services and therefore expenses.

PROFIT & LOSS -

Gross profit (or loss) is the difference between the sales and cost of sales.

Net profit (or Loss) is what's left after taking the expenses off the Gross profit and adding any Other Income.

Note: Profit does not necessarily equal money in the bank, your profit is a number on a page that could be represented by stock on the shelf, material in the factory, half completed projects or fixed assets. It is ironic but the business could be in heavy overdraft but still be profitable - this is called a cash flow problem (or 'the cheque is in the mail').

ASSETS -

These are also broken down into 2 groups.

1. Fixed Assets - owned by the business, such as buildings, plant & equipment, vehicles etc. Things that are necessary to generate the income and run the business that are going to be kept for a long time and cannot be easily converted to cash.
2. Current Assets - Things of a short term nature (under 12 months) easily converted to cash and of course cash itself, bank account, short term investments, debtors.

LIABILITIES -

Also broken down into 2 groups.

1. Long term liabilities - any loans, bonds, HP etc to be paid off over a period longer than 12 months.
2. Current liabilities - anything that needs to be paid out within the current financial year (12 months) such as creditors, short term loans and not forgetting the bank account if it is in overdraft.

OWNERS EQUITY -

The first thing to get our head around is that the owner of the business and the business itself must be seen as two separate individual entities, so even if you are the sole owner of your business - you are not the business itself.

Once this is understood it is easy to see that Owners Equity is the difference between the Assets and Liabilities and depending which way it swings could either be owed TO the owner or owed BY the owner to the business.

DEBTORS -

Those that owe the business money.

CREDITORS -

Those that the business owes money to.

INCOME STATEMENT -

A record of the day to day income and expenses of the business during the financial year. At the end of each financial year the values on the income statement are brought to zero for the start of the new year and only the profit or loss are carried over to the balance sheet.

BALANCE SHEET -

A snapshot of the status of a business at any point in time made up of the Assets, Liabilities and Owners Equity. These values which change according to movements in the business are carried forward from year to year.

DEBITS & CREDITS -

Note: Not the same as Debtors and Creditors (see above)

When recording your transactions you would divide your page into two columns - Debits on the left and Credits on the right (just remember Dogs first, Cats second). Now comes the 'which goes where'

Costs & Expenses - Debit
Income - Credit
Assets - Debit
Liabilities - Credit

TRIAL BALANCE -

Once you have sorted everything into your two columns, add each one up and they should balance with each other (if not you have boobed somewhere) - this is your trial balance and it is from here that all information is gathered to make up the Financial Statements of the business.

Vikki Allen is a Financial Manager with 15 years bookkeeping experience, an Advanced Diploma in accounting and a Post Graduate Diploma in Forensic Auditing & Criminal Justice from the University of KwaZulu Natal.

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Manage Your Business With Small Business Accounting

By Alvis Brazma

Running a business enterprise has never been an easy task. We all know that it is definitely one of the most difficult things to execute and hence, it is very important that apt resources are used to run a business and that these resources are well monitored by a competent person, who is well versed with the various things that are required to run a business. The size of the business can never be a hindrance because each business has to start off one day and then travel through various ups and downs and then get to a stage that all business owners dream about their business. Among all the various divisions of a business, the division that definitely acts as the backbone of any business is the accounting department. Taking the help of small business accounting experts can definitely prove to be an intelligent move by any small business owner because that helps him in getting accurate professional help from people, who are expert in this domain of providing help for small business accounting.

There are many firms that provide small business accounting help to small business thus enabling them to get expertise solutions to all their accounting problems and they can be rest assured that they would get the best services. With the help of these services, any business owner, who is running a small business, can definitely breathe the air of relief because this enables them to get the accurate accounting details for their firms and the professionals, who take up the responsibility of this service, make sure that they provide the best services and help the firm that hires their services to get the best results in return. Therefore, taking the help of small business accounting from a firm that specializes in this field is definitely one of the best things that any business owner can do for their business.

As there are many firms that provide these services to small business and other similar kind of businesses, one definitely needs to make sure that they opt for the firm that can provide them with the best services and they would be able to yield beneficial results for the firm. For this, it is necessary that one conducts an accurate and extensive research work because only a thorough research can help in getting the apt firm whose services would aptly suit the needs of your business. Moreover, this will also help you to understand the various services that are provided by different small business accounting firms and you also get to know all about the new updates that are happening in this field.

Small business accounting for sure turns out to be one of the most favorable things for any small business owner because it is for sure that he or she would get accurate services for his or her accounting department. This becomes even more fruitful because as this is an outsourced program, the cost that is associated with it is much less when compared to the amount, which is paid to the in house staff working for a small business.

Alvis Brazma gives advice to business owners about how to manage their business efficiently without any hassles.To know more about Accounting help, accounting outsourcing,bookkeeping help, small business accounting visit this leading internet source: http://www.impacctusa.com

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Small Business Accounting Firm Ensures Accurate Numbers

By Alvis Brazma
When a business is established, the owner tries to fulfill all his dreams and aspirations in the form of this business. A business is not only an entity; it is a dream for many people and people, who are adamant of making their business a big name definitely need to do a lot of hard work and need to put in a lot of good things to materialize their dream. Any big firm was never a big firm. It has to start from starch and from there begins the journey that takes them through ups and downs but it is sheer determination that makes a small business turn into a big name in the industry.

Nature and size of two businesses can never be the same and keeping this in mind it is necessary that the accounting departments of all businesses fit the bill of the requirements. The accounting department of any firm is definitely the one department that has a lot to do in terms of performance and in terms of making the fate of the business organization. Keeping this thing in mind, this means that a small business organization would also need to have a competent accounting department in place. However, if this is not possible, then taking the help of a small business accounting firm that is completely competent in providing expert services to any small business firm is definitely an intelligent move by any business owner, who wants to fulfill all his dreams of seeing their organization in the limelight of the industry.

Taking the help of a small business accounting firm yields a lot of great results because the people, who work is these firms are CPAs and they know all the exact things that need to be done to take your business to the next level. These professionals, with their competence level and knowledge of the various aspects that are associated with the accounting department of any firm, make sure that all the accounts books in your firm are maintained properly and accurately. After all, accountancy is the game of numbers and if there is a slight mistake in any of the numbers, then it can lead to huge losses.

There are many firms that provide small business accounting help for small business firms. Therefore, it is mandatory for you as a business owner that you conduct a thorough research about all the firms that provide this service. This helps you in getting a firm whose services fit to the T with the nature and kind of your business. This also helps you in getting a deal that suits your budget. Moreover, the added advantage of outsourcing work is that it is less expensive when compared to the costs that are associated with in house employees.

Therefore, that you know from where and how you can take help of small business accounting firm, you will simply need to contact the firm that you decide to take help from. However, make sure that they are the best support. Moreover, just because you would be handing over the responsibility to some one else, it does not free you from keeping a track of the work. So do ensure that things are taken care of.

Alvis Brazma gives advice to business owners about how to manage their business efficiently without any hassles.To know more about Accounting help,bookkeeping help, small business accounting firm visit this leading internet source: http://www.impacctusa.com

Article Source: http://EzineArticles.com/?expert=Alvis_Brazma