Last week, we covered two of the most important aspects of small business bookkeeping: the balance sheet and the income statement.
These two components are often considered the pillars of business bookkeeping.
But of course, there are a whole lot of other terms business owners just like you should be familiar with.
You don’t have to be a bookkeeping expert to appreciate the importance of meticulous bookkeeping and accounting when it comes to running your business.
And in the same train of thought, being a business owner doesn’t mean you have to be (or should be) your business’ bookkeeper!
Are you struggling to get your head around all sorts of bookkeeping requirements? Prepare for tax time with expert small business bookkeeping support from Maximum Business Solutions’ team of Melbourne bookkeepers.
More important bookkeeping terms to live by
The balance sheet and income statement might be the two biggest financial reports in your business.
However, they’re by no means the only ones.
In addition to these two, there are other bookkeeping terms you might not know. You’re almost certainly going to run into them from regularly, so you might want to familiarise yourself with them now!
This is the period when financial data and information are reported. Generally, the accounting period is 12 months but depending on your business, you might choose do report on a monthly or quarterly basis.
Remember liabilities? That’s exactly what accounts payable are. It refers specifically to outstanding bills and invoices owed to contractors, vendors, consultants and suppliers.
Similarly, accounts receivable are short term amounts that sellers are owed by customers. If your business processes a lot of credit payments, expect to see this one pop up frequently. Receivables are classified as assets on the balance sheet.
Cash has a ledger. Inventory has a ledger. Expenses has a ledger. But what are they?
Ledgers total up all transactions relating to one specific account. They list all additions, subtractions and changes over the accounting period.
And the general ledger is where all your vital financial information is recorded – think of it as the raw data before it’s organised into your income statement and balance sheet.
Assets can be damaged or straight-up wear-out over time! Depreciation expense is how your bookie accounts for it.
Where are daily transactions initially recorded? Journals, of course! These list all transactions in chronological order. Specific accounts you have like payables and cash might even have their own journals.
Before finalising your financial statements or reports and closing your books for the accounting period, make sure that all the info you have are balanced and accurate.
And that’s where the trial balance comes in.
Think of the trial balance as a dry-run for your final balance sheet.
Are you a business owner in Melbourne looking for small business bookkeeping?
Maximum Business Solutions be your bookkeeping partner!
Now that you have a good grasp of these different bookkeeping terms, it’s time for you to find a bookkeeping team to support your business.
And that’s where we come in!
If you are interested to know how Maximum Business Solutions can help you kick start your bookkeeping requirements, you only need ask! Give us a call today on (03) 9589 0128 or reach us here for answers.