10 Bookkeeping Terms and Why You Need To Know Them

Basic bookkeeping terms are essential, as you will need to understand what you will be dealing with while processing any transactions or recording any expenses done. This also helps you to understand what your bookkeeper in Victoria BC is telling you at the end of each month, and knowing the terms will help you to not feel alienated when he or she explains anything that is related to your business. It will also avoid you from getting lied to or confuse you when your balance does not equal.

There are a few fundamental terms used in bookkeeping, such as:

  1. Accounting period – This explains the time frame for financial information that are being tracked. Most businesses have their accounting period in duration of a month and have their reports done quarterly or annually.
  2. Accounts payable – This tracks any outstanding bills from vendors or individuals where the company buys their goods.
  3. Accounts receivable – This account tracks the sales done through credit, which is where the customer is given credit directly by the store and the payment will be collected at a later date. It has nothing to do with sales by credit card.
  4. Depreciation – This method is to count the value of the business’s asset, which ages over time and has their values decrease. Assets such as buildings and equipment will need to be replaced after a few years.
  5. General Ledger – The notable of the bookkeeping system, this is where the company’s accounts are summarized systematically.
  6. Interest –When a company buys an asset using a loan, the amount to be paid will be added with the interest, which is based on the percentage of the amount that you borrowed. The bank calculates the amount of interest to be added.
  7. Inventory –This is the list of any goods that the company intends to sell to the customers, and each are tracked accordingly during the duration of time.
  8. Journals – This is where the bookkeeper keeps all the business’s daily transactions in a chronological order. There are three active accounts, and all of them have their own account.
  9. Payroll –Salary or payroll, are expenses from the company as this is when they pay their employees. It also includes any payroll to the government, which includes the taxes on behalf of the employees.
  10. Trial Balance – This is the trial stage of balancing out the books before producing the final financial statement report and closing of the book over the accounting period. Any errors should be rectified and redone at this stage.

Please contact me if you need help with your bookkeeping.

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