At Maroo Advisory, we understand that accountants sometimes speak a different language. As our client, we want to ensure we use terms that you understand and to help you, we have prepared this list of commonly used accounting phrases.
Although we promise to make every effort to avoid using jargon, sometimes we can forget. If we do, don’t be afraid to ask us to explain again in “Plain English”!
| Asset | An asset is something that you own. For example, cash in bank, plant and equipment or motor vehicles |
| Balance Sheet | A balance sheet is the window to your business and it summarises your assets and liabilities |
| Bank reconciliation | A bank reconciliation is what we do to balance the bank account |
| Capital Gains Tax or CGT | The tax you pay on the profit on sale of an asset or Investment |
| Capitalise | If you capitalise an expense, you can write it off over a number of years. You cannot write this expense off this year |
| Credit Loan account | A credit loan account is the record of money that the company owes you |
| Creditors | Creditors refer to others you owe money to |
| Debit Loan account | A debit loan account is the record of money that you owe the company |
| Debtors | Debtors refer to others who owe you money |
| Depreciation | Depreciation means claiming the cost of an item over a number of years rather than claiming the whole amount up front |
| Fringe Benefits Tax or FBT | Gross Profit Margin is calculated by adding the purchases and direct costs of sales and then calculating the profit. Dividing the profit figure by the sales figure equals the gross profit margin. Gross profit is your profit as a percentage of sales. It is NOT the same as Mark Up |
| Journal | An Accounting entry we do to adjust your financial accounts |
| Liability | A liability is something that you owe to someone. For example, a bank loan or lease |
| Mark Up | Mark-up refers to your profit as a percentage of costs. It is not the same as gross profit margin |
| Negative gearing | Negative gearing works in the same way as running a business. When the expenses, including interest, are more than the income (rent), you can deduct this loss against other income you earn |
| Profit and Loss account | Profit and Loss is the amount calculated by taking all your expenses to run the business away from your sales or income. If the remaining amount is positive, you have made a profit, it is negative, a loss |
| Rebate | A rebate is a direct reduction of tax |
| Shareholders’ Equity | The business’s net worth that is owned by you and other shareholders |
| Tax Deduction – individual | A tax deduction is a deductible expense that can reduce taxable income. Once all deductions have been made, tax is calculated at the appropriate marginal tax rate for the individual |
| Work in progress | Work in progress refers to work that is underway, but has not been finished at the end of the month. This work is carried forward to the next period to be claimed when you actually raise the invoice for that job |
