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Accounting Terms: The End

Most of us understand that a business exists to help money change hands – specifically, in your case, into your hands. However, when someone does pay you for your goods and services, it's important that that action has an appropriate name. In accounting, it is referred to as revenue or sales, and it is considered to be the gross income your business makes via its standard business operations. To calculate your revenue in any given accounting period, you just need to multiply the units sold by their cost. If you use accrual accounting methods, you'll include any sales made on credit, even if you've not been paid yet, though for cash-based accounts, the sale isn't included in your revenue until you actually have the revenue in your bank account.

It's The Simple Things In Life
We've spoken about double-entry bookkeeping before, wherein everything is recorded as both an asset and a cost simultaneously to keep two accounts in balance. While this method can have its usefulness, it's obviously much more complicated than its counterpart, single-entry bookkeeping. In this system, you only need to record one entry per transaction, which will record cash flowing through your business in both directions. This can be done via software or, if you're in a pinch, even simple tables in a spreadsheet, making it a much easier alternative.

Reconciling The Errors
Even when you're as careful as you possibly could be, there's every chance that an error will have been introduced to your accounts. With a trial balance, you periodically compile your debits and credits into two different columns, which allows you to ensure they are equal and that no errors have been made.

Going With The Flow
A fixed cost can be useful for managing your accounts because you can prepare for it in advance, but not everything is going to be a fixed cost. Variable costs are instead tied to the level of production for your business, and will go up as production increases, and go down as production decreases. Despite their unpredictable nature, you'll need to do what you can to account for these costs in advance to keep your business operational.

Go Out And Conquer The World
And that's the end! These are the basic accounting terms you'll need to understand, so make sure you go back through and read all of our guides to acquaint yourself with them. If you have any questions, the friendly team of small business accountants here at the M.A.S Partners would be more than happy to help you. To speak with our team of small business accountants in Sydney about what we can do for you, call us on (02) 9211 5000.

 
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