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29 July 2021

At YST we like to be as down to earth as possible when it comes to your bookkeeping needs but sometimes, we just can’t avoid a little jargon.  Although we would advise to outsource your bookkeeping, we thought we would share some of the most common bookkeeping terms and what they mean.

 

Sales – The Sales account tracks all incoming revenue from what you sell. Recording sales in a timely and accurate manner is critical to knowing where your business stands.

 

Purchases -These are any raw materials or finished goods that you buy for your business. It’s a key component of calculating “Cost of Goods Sold” (COGS), which you subtract from Sales to find your company’s gross profit.

 

Cash – It doesn’t get more basic than this. All monies that pass in or out of your business are either cash receipts or cash disbursements.

 

Accounts Receivable – If your company sells products or services and doesn’t collect payment immediately, you have “receivables” or “money due” from customers.  Knowing your receivables is key to collecting debt and money owed to you.

 

Accounts Payable – No one likes to send money out of the business, but a clear view of bills you owe means you can keep on top of payments and cashflow. Paying bills early can also sometimes qualify your business for discounts.

 

Payroll Expenses – For many businesses, wages and the related costs of Employers NI and pension expenses can be the biggest cost of all. Keeping this accurate and up to date is essential for meeting tax and other government reporting requirements.

 

Inventory or Stock – This is unsold product and raw materials currently sitting on the shelf.  Regular stock counts are critical. Too much stock can mean cash is tied up unnecessarily, too little and you can’t deliver to customer requirements.

 

Loans Payable – If you’ve borrowed money to buy equipment, vehicles, furniture or other items for your business, this account tracks payments, due dates and the outstanding balance.

 

Owners Equity – This tracks the amount an owner (or owners) put into the business. Also referred to as net assets, owners equity reflects the amount of money an owner has once liabilities are subtracted from assets.

 

Retained Earnings – This is any company profit that is reinvested in the business and not paid out to the owners. Retained earnings are cumulative, which means they appear as a running total of money that has been retained since the company started.

 

We hope you find this useful. If there is any you think we have missed let us know at info@yoursupportteamltd.co.uk .