Ever talking to your accountant and have no idea what they mean when they use words such as, gross profit, accruals, income statement or balance sheet…?
Like any industry, there is ‘lingo’ associated with it that gets thrown around. But this lingo is not always explained and at times, just assumed that you will know what is being spoken about.… cue the awkward ‘smile and nod’. I think we have all experienced this feeling, which is then followed by a sense of feeling too stupid to ask.
Here is a few to start us off with, but over the next few blogs I will explain some more of this ‘jargon’ in hope of helping you gain more understanding of the industry. Watch this space…
A method in which income and expenses are recorded when they are actually paid (the opposite of accruals accounting).
A method in which income is recorded when it is ‘earned’ (invoiced) and expenses are recorded when they are ‘incurred’ (invoiced), this is all independent of actual cash flow.
Records amounts your business owes to other businesses (creditors) for the sale, to you, of their goods or services.
Records amounts that another business/company/individual owes your business for the sale of your goods or services.