Accounting Terms

• Bank overdraft


  Where a business or individual is allowed by the bank to withdraw more money than they have in their bank account
• Bank Statement


  A document that shows all transactions with the bank from a particular account
• Budget


  A plan of income and expenditure
• Credit Card statement


  Monthly account showing all transactions involving a credit card
• Credit Note


  A document showing that goods have been returned, often because goods were faulty
• Invoice


  A document showing details of a credit sale or purchase
• Liabilities


  Amounts owed to other people / businesses or institutions, future sacrifices of economic benefits but the business is currently obliged to make as a result of a past transaction
• Mortgage


  A long-term loan secured on property
• Net worth


  An individual's personal contribution in the household, net worth equals personal assets - personal liabilities
• Receipts


  Proof that cash payment has been made
• Pay slips


  Documents received with wages/salaries that show gross pay, income tax, other deductions and net pay
• Statement of Net Worth or Affairs

  A statement setting out the assets, liabilities and net worth of an individual or a household at a given point in time
• Tax return


  A statement sent to Inland Revenue Department declaring income and tax for the year
• Accounting services


  Give business's advice, prepare tax/GST returns, prepare financial statements
• Accounting


  A system of communicating financial information to interested groups
• Accounting entity


  The business's activities must be kept separate from the owner's
• Accounting equation


  Asset + Liabilities + Owner's Equity
• Accounting period


  Time over which profit is measured, usually one year
• Accounts payable


  Businesses that are owed money for purchased inventory/goods and services
• Accounts receivable


  People or businesses who owe your business money
• Administration expenses


  Expenses incurred in the day to day running of the business
• Assets


  Things of value owned by an individual
• Balance day


  The last day of the accounting period
• Company


  Businesses that are owned by shareholders and have limited liability
• Cost of goods sold (COGS)


  The cost to the business of the inventories that has sold
• Current assets


  Assets which can be easily turned into cash within the current accounting period
• Current liabilities


  Amounts the business owes which have to be paid within the current accounting period
• Drawings


  Cash/goods taken from the business by the owner
• Expenses


  Outflows/losses/consumptions of future economic benefits that result in decrease in assets or increase in liabilities and reduce owners equity
• Financial expenses


  Expenses resulting from the use of money
• Financial transactions

  Transactions that involve money
• Going concern


  It is assumed that businesses will continue for several accounting periods into the future
• Gross profit


  Sales revenue - cost of goods sold
• Historical cost

  The original purchase cost of an asset
• Intangible assets


  Assets which can not be seen/have no physical presence, but which do exist
• Inventory


  Stock of goods for sale
• Mark-up


  Amount added to the cost of inventory/goods to cover expenses and desired profit
• Monetary measurement


  The value of all transactions is measured in dollars
• Net profit/surplus


  Excess of income over expenditure, Total revenue > Total expenses, Profit = Revenue - Expenses
• Profit


  The reward for risk taking and entrepreneurship