on activity to date.
• Trial Balance. Activity report showing opening balance, monthly transaction totals, and closing balance for all accounts in the general ledger, i.e. both Profit and Loss accounts and Balance Sheet accounts. Not as important as the Profit and Loss and Balance Sheet
• Depreciation. When you buy a large item for your business, such as a truck, the cost is entered as an asset on the balance sheet, because it will in theory have a very long life of use and so a set amount of this can be used as an expense item called depreciation. The longer the expected life of the asset the lower the depreciation percentage per year, e.g. in New Zealand for computers – these are depreciated over four years at 38 percent per annum.
• Cash accounting. Is when no debtor or creditor invoice transactions take place. This usually occurs in a business where all transactions are in cash such as a café, and so the balance sheet of this business would only have fixed assets, bank balances, tax payable and any loans, or financial debt showing.
• Accrual accounting. Is where debtor and creditor invoices are the norm. I purchase goods in June and they are due for payment in July. My balance sheet shows the amount owed as a creditor liability.
• Double entry book-keeping. Record of transactions that require entries in at least two accounts, e.g. if you pay the telephone bill you must account for it in your general ledger as a debit to the telephone account, and the opposite entry is to your bank account as you have removed money from the account to pay the bill.
• OD. Usually means an overdraft facility, or you are in overdraft • P&L (report). Profit and Loss (report) • In the black. Means you are in profit, or that there is money in the bank.
• In the red. Usually means you are in overdraft or in debt, or the business is not making money
• Overhead. The costs that you incur in running your business, in other words your variable costs
• COS or Cost of Sales. The direct costs of making or manufacturing your product, or the cost of stock that you have bought in and are re-selling at a higher value
• Stocktake. Counting the items that you have in stock that you have not yet sold
• DD or Direct Debit. When a bank, or creditor or agency you owe money to is allowed to deduct money from your bank account. You cannot stop it or change it.
• DC or Direct Credit. When you can have money paid directly from your bank account to someone you owe money to. You can choose the amount and date that it is paid. Similarly if you are owed money another party can do the same to pay you.
• GST Goods and Services tax. Set by and payable to the Government.
• PAYE Pay As You Earn. Tax deducted from salaries and wages, set by and payable to the Government.
• Corporate Income tax Business tax. Tax on the business's net income after deductible expenses set by and payable to the Government.
I realise this is a long list but I hope it helps you to understand your figures better and enter into a more meaningful conversation with your accountant. If you don't know then ask!! Feel free to make contact if you need further clarification.
Chris is a Director of Learn.fast providing high
quality, practical and relevant training, coaching and mentoring for small businesses. www.learnfast.co.nz
Lister Marine range 20hp – 55hp Lister Marine range 20hp 55hp
Shaw Diesels Ltd, 13a Douglas Alexander Parade, Albany, Auckland, New Zealand. Ph: +64 9 414 7360 Fax: +64 9 414 7365 www.shawdiesels.co.nz
November/December 2012 Professional Skipper 63
DISTRIBUTOR FOR GARDNER AND LISTER ENGINES
NEW ZEALAND
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