Accounting Terms

Accounting Terms and Their Meanings
If you are in business sooner or later you will come across terminology that you do not understand. As you become more familiar with the business and financial side of your business the language of accounting will become simpler and you will be able to make sense of the details in the reports and financial statements supplied to you by your accountant.

Some of the basic terms are as follows:

  • Accounting
    This is the term that refers to the process of tracking your businesses income and expenses and using this information to prepare financial statements and arrive at the tax position of the business.

  • Bookkeeping
    This is the task of recording all the details of the various transactions of the business which includes tracking its revenue and its expenses. It is the starting point of the whole accounting process and therefore the accuracy of the bookkeeping is important.

  • Invoice
    This is a written record of a transaction generally submitted to a customer at the time when a transaction has occurred. This transaction can either be a sale by you to a customer, in which case you issue an invoice, or a purchase by you from a supplier in which case the supplier will issue you with an invoice.

  • Statement
    This is a monthly written summary of the total of all invoices that are yet unpaid by you for purchases that you have made. It can also be a statement of all invoices outstanding and unpaid by a customer for sales you have made to them.

  • Ledger
    This is a collection of all the financial accounts in a business under various group headings such as revenue, expenditure etc.

  • Accounts Receivable
    This relates to the amounts owed to your business for sales you have made to customers. You expect to receive money for those sales so the accounts receivable figure is important, especially as to the effect it has on your cash flow.

  • Accounts Payable
    This related to the amounts that your business owes to suppliers for purchases that you have made.