If you employ accounting and tax services in Malaysia, you might find that there are a lot of terminologies being used by accountants. As a business owner, it is important that you know of these things so as to not get lost whenever your accountant tells you something.
In this article, I will go over some of the most basic accounting terms that are being thrown around in the business world.
The balance sheet is considered to be one of the most important things in a business as it tells the owner, as well as the stakeholders, about the company’s assets, liabilities, equities, and more.
The entries in a balance sheet will vary depending on the need. The accountant may be tasked to put the entries monthly, quarterly, or even annually as well.
The importance of this particular sheet would be to provide information about the financial health of the business and so that the business owners will be able to look at how much money his/her company is spending or earning.
The assets of the company are the things that the business has accumulated from business operations. It could represent the items that may depreciate in value over time or the things that you sell to your customers.
The things that are in the company’s name such as the inventory, cash, buildings and property, investments, equipment, warehouse inventory, supplies, and more represent the company’s assets as well.
Also known as profit, gross margin refers to the total number of sales that have been made by your business. This is known to be subtracted by associated costs which may represent the goods’ wholesales costs, manufacturing costs, supplies.
The bookkeeping ledger contains many things- one of which is the balance sheet and the income account statements. This is collectively part of the company’s general ledger and it contains entries for credit purchases, sales, income losses, office expenses, and many more.
On Account/ On Credit
When you purchase goods to be sold to your customers- you have two options. Either, you pay the supplier in full or that you pay them at a later date (using credit).
The on account or on credit is a term that is used to signify the products or services that been sold to your customers with the use of credit.
They may not be paid yet which will result in some terms of the account that may lead to interest charges.
In the business sense, receipts tell you the total amount of money that has been collected in your business transactions- usually over the course of one day. It does not, however, include the other revenues collected.
Revenue can also be referred to as the company’s income, which compromises the total amount of money collected at one point in time.
It can include credit purchases, cash sales, interest income, and subscription fees. It is a bit different than receipts in that it can include the money that is still not collected at the time of the delivery of the goods.