Top 4 Basic Bookkeeping Terms
70Top 4 Basic Bookkeeping Terms
If you are looking at becoming a bookkeeper it is important for you to learn some of the basic bookkeeping terms. What is bookkeeping then? Bookkeeping is basically an activity that includes the maintenance and recording of business accounts or transactions.
The above definition alone is not enough to explain the true extent of bookkeeping so here are some more of the basic terms:
1. Income and expenses - Every sale and transaction in a business should be recorded when working as a bookkeeper. The income from the business has to be recorded daily no matter how small. There will always be expenses associated with the income and these need to be recorded also. Set up a bookkeeping system in your business that will help you keep track of how much the business spends. Once a week, the bookkeeper should forward a financial report to the owner of the business, so that they can keep up to date with the cash flow and profitability.
2. Accounts: receivables and payables - These two basic bookkeeping terms are almost the same as the income (account receivables) and expenses (account payables) mentioned above. Both have to be followed up systematically and the accounts receivables should be followed up weekly as a minimum. Most business owners pay the account payables monthly but this could vary depending on the cash flow of the business. The small business owner will advise the bookkeeper of their preferences for recording and following up accounts and receivables.
3. Tax - Another one of the important terms to know as a bookkeeper is tax. No-one can escape taxes so it is important to monitor and minimize the businesses taxes where possible. The accountant is usually responsible for predicting and minimizing tax but it is important that the bookkeeper understand what can be done.
Many businesses have been subjected to public scrutiny and even shut down because of the non payment of taxes. A separate category for taxes should be setup in the bookkeeping software. Keeping a regular eye on this with monthly reporting would be beneficial for the business owner and should always be part of bookkeepers role.
4. Cash sales and payments - When recording daily data, it must be clear and specific that the transaction made belongs to either sales of purchases and it must be detailed that this is cash so that it is not included in the bank reconciliation.
About the Author: Tammy Love has been working as a bookkeeper in her own businesses for over 14 years. She is now an accredited Bookkeeping Trainer delivering training in the classroom, RPL as well as by correspondence and online.
If you would like to know more about enrolling in FNS40210 Certificate IV in Bookkeeping Course with Tammy click here >>
