Talking Cents

Accounting Terms: G Is For General And Gross

By now, we've covered roughly half of the general terms you'd need to able to deftly navigate the accounting world, but that doesn't mean we're even coming close to stopping. There are still a good number of terms you'll need to familiarise yourself with before you'd be able to read a tax document half asleep and actually understand what it says, and we're still dedicated to making sure you reach that tired nirvana.

Maintaining The Books
If you're using a double-entry bookkeeping system, then you'll need to maintain a general ledger to record a wealth of data and financial transactions for your business. These ledgers include both your debit and credit account records, and you'll be able to use them to measure the health of your business at any point in time, conceptualise your financial performance, and prepare any financial report that you might need. Generally speaking, the general ledger is quite a handy thing to keep up to date wherever possible.

Professionals Have Standards
There are a range of standard practices that every accounting professional needs to maintain, and these are typically conceptualised as the Generally Accepted Accounting Principles (GAAP), which is the name of two different systems employed by both the United States and Australia as a local equivalent to the International Financial Reporting Standards. These standards are used to make sure you're preparing financial reports properly and following the same set of accounting rules as everybody else in an attempt to close loopholes and make sure everything is as transparent as possible. As a consequence, these standards are definitely worth reading up on every once in a while.

Know Your Worth After You Consider Your Cost
Knowing how much revenue your business produced in an accounting period is useful information, but on its own, it can be a bit limited. As an alternative, you might consider instead your gross profit, which is considered to be the profit you produced once you've considered the total cost of selling your products or services. This equation is simple to complete, and only requires you to understand your COGS, or cost of goods sold.

A Rose By Any Other Name
If you'd like another term for what is largely the same thing, then you might instead want to consider your gross margin. Instead of representing your gross profit as a dollar value, the gross margin divides that value by your total revenue, instead representing it as a percentage. With that percentage, you'll be able to understand how efficiently you're providing your services or products, helping you maximise that efficiency later on.

Get In Touch With The Professionals
If you're still not 100% confident in these ideas, that's okay, but it's important to remember that even a minor mistake on an official document can quickly become a major headache. Instead, you can rely on the M.A.S Partners and our business accountants to handle your finances for you, leaving you free to manage your business as you see fit. To speak with our team of small business accountants in Sydney about what we can do for you, call us on (02) 9211 5000.