Talking Cents

Accounting Terms: Finishing C And Beginning D

Accounting work is incredibly important for any business and cannot be neglected. If you've elected to do your own accounting for your small business, then you've got a tough but rewarding journey ahead, for which you'll need to prepare appropriately. If you're still insistent on going it alone instead of contacting someone amazing, such as our team, then you're going to need to know the following terms.

You've Got To Know Your History
Mistakes happen. Transactions don't always get recorded to the right account, or when they do, it's quite possible there might even be a mistake included within the final entry that needs to be corrected. Whatever the reason, it pays to go back through and reconcile all of your accounts by closing the books.
Closing the books refers to the act of checking all financial transactions within any given accounting period, and it aims to make sure everything is accurate. While simpler for cash basis accounting systems, it isn't impossible to close the books when using accrual basis accounting, if a bit harder.

COGS In The Machine
While a basic tenant of any business, the COGS of your assets is an incredibly important term to understand. COGS stands for Costs Of Goods Sold, and refers to the direct cost of producing any good that you've sold, whether that's a physical product or a service. This cost includes materials and labour, and is used to determine the profit on each sale.

I.O.U
In some businesses, not everything is as simple as putting things into a single book. In a double-entry bookkeeping setup, the terms 'credit' and 'debit' take on new life. Credits are any transaction that will either increase a liability or equity account, or it may decrease an expense or asset account, and these entries are recorded on the right side of the account.

Cash Only, No Credit
By comparison, a debit transaction does the opposite. These transactions decrease your liability or equity accounts, or increase an expense or asset account, and they belong on the left side of the account. An account is considered to be in balance when both the debit and credit are equal.

It’s Dangerous To Go Alone
At the end of the day, accounting is a dangerous task filled with pitfalls that can be easily stumbled into. To save yourself the hassle of discovering a mistake too late, you might want to consider instead reaching out to a team of professional accountants, such as the M.A.S Partners. With some help from our accounting professionals, you'll be more than equipped to handle any challenge as it arises, thanks to our years of experience working as the preferred choice of business accountants for small businesses in the city. To speak with our team of small business accountants in Sydney about what we can do for you, call us on (02) 9211 5000.