Accounting Words You Have Probably Come Across, But Do You Know What It Means?Sometimes when you’re running a small business, it seems as though you’re carrying the weight of the world on your shoulders. There will be times when you feel like you’re still on square one because there are things you just supposedly should understand. If you’re managing the business on your own, there’ll be things you just can’t shrug off; for example, accounting. Here is a compilation of accounting terms that you probably have come across but may need a reminder of what it means.
1. Cash flow
Let's start with something simple: cash flow. The term cash flow is pretty self-explanatory; cash is money and flow as in movement. So cash flow is the movement of money where inflow refers to money coming in and outflow is when money comes out. Understanding the concept of cash flow is important because it indicates the financial performance of the business, whether you are generating profit or experiencing a loss.
2. What is the difference between gross profit and net profit?
Bear with us here while we get a bit more technical. When you’re drawing up income statements, you may come across the terms gross profit and net profit. Usually, you would start with calculating the gross profit. Gross profit measures the money generated by the company overall whereas net profit will deduct the business’ expenses which reveal the profitability.
3. Financial statements
If you’re going to be doing your own business’ finances, we can guarantee that you will come across financial statements. Financial statements are prepared at the end of every financial year. So chances are, you may have had to submit one already or are planning to. The formal records are quite daunting because you are looking at transactions of your business over the year. It's a tedious and time-consuming process but something that is important but is not worth pulling out your hair for because business accountants can help you prepare it.
4. Bookkeeping vs. Accountants
The routine of tracking every single transaction can be monotonous but it needs to be done to prevent future complications. Fortunately, some people can perform these tasks; these people are called bookkeepers. It’s like a tag team, bookkeepers are there for the most part when you’re running your business to ensure all financial records are up-to-date. When the end of the financial year comes around, the baton is passed to accountants who will turn it into formal records. Accountants can be bookkeepers however, bookkeepers cannot be accountants - unless they are qualified to do so of course. Sometimes, businesses will have both bookkeepers and accountants, other times just one or the other. It’s completely up to you and what you feel is right.
Things can be confusing and overwhelming when you’re trying to juggle everything with just two hands. We totally understand how you would feel, that’s why we’re reaching out to you and lending you a helping hand. If you are a business owner based in Sydney and are looking for a local small business accountant, look no further. With M.A.S Partners in the picture, so much financial weight can be lifted off your shoulders.
We are dedicated to making your life easier so an investment in us is an investment in your business. To speak with our team of small business accountants in Sydney about the services we offer and what we can do for you, call us on (02) 9211 5000 or visit our website at https://www.masaccountants.com.au
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