Accounting Terms Starting From A
Accounting for a small business is no easy thing. If you've never managed a business before, you're likely to feel overwhelmed by the lexicon accountants like to use, thanks to the sheer volume of unfamiliar and at-times confusing terms, but that doesn't mean you have to stay that way forever. With a little help from your friendly neighbourhood accountants, you might still be able to wrap your head around this all yet.
Are you ready?
Accounts, Both Payable And Receivable
Your accounts payable is what you owe other people. Whether you've paid for a supplier to perform work for you or purchased goods from a vendor, if you've made those payments with credit and haven't actually supplied any money yet, then those transactions are entered into your accounts payable.
Accounts receivable, by contrast, is money that you're owed. When you supply goods and services to a business and they don't pay for them immediately upon the transaction taking place, which can be common for suppliers such as freelance artists or independent vendors, then those transactions belong in your accounts receivable, and also become an asset in your balance sheet.
A Is For Accounting Period
Most of the world tells time solely by the Gregorian calendar, but not everyone. Accountants are one such example, and instead prefer to use accounting periods layered over the calendar to remain internally consistent with themselves. For instance, the financial year is one long accounting period, while businesses that report to the ATO every three months will go through four accounting periods in a year, and some businesses even choose to manage their books week-to-week, which means they'll have a staggering fifty-two periods in a single year.
Use Maths To Safely Count Your Chickens Before They Hatch
Accruals are the measurements of both revenues and expenses before they're made available to your business. A business will use accruals to record their performance before it is itemised into invoices, and largely deals with information that will ultimately land in the accounts payable and receivable. Accrual based accounting, then, is the act of accounting based solely on anticipated costs and revenues, and can be used to provide an incredibly accurate view of the health of your company.
Assets Make The World Go Round
Without assets, you won't be able to actually make any money from your business. An asset is simply something with economic service, whether that's a good that you are selling or a service that you can provide. If you're planning on using or selling an asset within the next year, then that asset is considered a current asset, and all assets are recorded in your balance sheet.
Just Ask A Professional
Without the right skillset, managing your own accounts will be difficult, and it might be simpler to just ask a professional for help. Thankfully, the M.A.S Partners and our superb business accountants are prepared for the task. To speak with our team of small business accountants in Sydney about what we can do for you, call us on (02) 9211 5000.