Here is a simple to read, A to Z.
There are words used only within accounting and other that have multiple meanings.
Some words are interchangeable and some carry a clear singular meaning.
Having a good understanding is key to ensuring a business can be successful.
Not everyone is a fan of bookkeeping and accounting and some don’t feel confident to do their own business finances.
If it takes up too much time and causes endless stress maybe it’s time to think abit outsourcing!!
Wallace Accountancy & Bookkeeping help business owners have the time to concentrate on what’s important by providing an Accountancy service.
Taxable products with a rate of 0% VAT.
This means it is included within the VAT Returns but no VAT is chargeable.
Often used to reflect items of necessity.
Below are some common examples of zero rated goods.
- Food items
- Sanitary products
- Children clothing
- Animal feed
- Prescription & medical equipment
- Water and more.
Goods that are zero rated are likely less expensive to purchase.
Zero rated goods are different to goods that are exempt.
Getting it wrong can be a costly mistake.
If unsure of how to manage and file VAT Returns, reach out.
It is the end of an accounting period, usually 12 months.
For a sole trader, year end is 5th April.
For a limited company the year end date is dictated by the company incorporating date.
At year end a number of processs take place to close off the books.
Often referred to as Year End Adjustments.
An essential task to ensure financial reports are accurate.
Adjustments might include the following examples:
- Depreciation charges
- Adjustments of errors
- Debts and prepayments
If someone is unsure what adjustments to make, they should reach as for help.
One of the leading platforms in 2020, offering online accounting software.
Simple and straight forward to use. A top favourite among business owners.
Providing a range of packages to suit every need. Starting from as little as £10 per month.
HMRC integrations, meaning quick and easy submissions for VAT, Tax, payroll and more.
Designed to help save you time and reduce costly errors by utilising automation.
When accounting gets complex or when owners need a bit of guidance they can easily invite in a bookkeeper or accountant to help out.
All securely stored online which means it can be accessed from multiple devices.
Offering a 30 day free trial! So business owners can get a glimpse of what it can offer before buying.
This is used to describe funds taken from the business bank account.
Often referred to as drawings, although they are actually different things.
Drawings are money taken by the owner for personal use. It reduces the owners equity or capital.
Withdrawals are funds taken from the bank to use for business expenses.
Funds withdrawn and then held in cash form are usually referred to as petty cash.
Owners drawings are not business expenses.
Drawings will show as a movement on the Statement of Financial Position.
It will not affect the Profit and Loss Statement.
Money withdrawn and held as petty cash also shows as a movement of funds but when spent it is then shown as an expense.
It is essential that a business owner keeps track of business finances so they know what funds are available to withdraw.
If they draw too much from the business they could leave the businesses vulnerable without enough cash flow to carry on.
Owners need to keep on top of their finances to ensure their business can grow and be successful.
What is Wave? How can it help?
An accounting software designed for small businesses.
Containing lots of functions and features to help make managing finances simpler and easier.
There are two apps that work alongside the software to make managing business finances faster by automating some of our everyday processes.
The apps are clearly named as follows
- Wave Receipts
- Wave Invoicing
After downloading to our phones, tablets etc they are simply named Receipts & Invoicing
No more stressing about calculating and collating data. Wave Accounting software can help make things quicker and simpler.
Easily print off reports to store and share, selecting a date range tailored to specific requirements.
There is no reason not to be using accounting software. Get online, sign up and sign in.
For people doing their own bookkeeping it will save hours of stress and time.
What is VAT?
Short for value-added tax. Not to be confused with personal tax.
Often thought of as sales tax, as it is added to almost everything that we buy.
At the time of writing this, in the UK 2020, the VAT threshold is £85,000.
This means that if turnover is above £85,000 over a 12 month period we must register for VAT with HMRC.
We can opt to voluntarily register if we feel this might be beneficial to our business.
Below are the common VAT rates:
20% is the standard VAT rate for most goods and services
5% is a reduced rate used for some goods and services, such as utility bills for example.
0% or Zero rated is applicable to many things including children clothing & books.
In addition, some items are exempt from VAT or have no VAT.
Only VAT registered companies can charge and reclaim VAT.
It can get confusing ensuring that the correct VAT amounts are being recorded when there are so many options to choose from.
It is always best to seek professional advice if you feel you need to be VAT registered.
Mistakes can be costly.
Often referring to the company revenue which is income from services or goods before deductions.
Turnover is the total sales over a period of time.
In cash accounting turnover is all sales that have been paid.
In accrual accounting turnover is all sales that have been invoiced regardless over whether they have been paid.
Found on the top line on the income statement.
For VAT registered businesses, turnover is income less VAT.
Turnover is revenue or gross income.
It’s important to know that turnover should include full costs.
Turnover should include commissions, fees or shipping costs for example.
Any expenses that would be directly invoiced to the customer.
If the turnover is not accurately calculated it may not be clear that VAT registration is required, taxes might not be paid, resulting in fines and investigations.
Getting it right is essential, business owners should not be afraid to ask for help.
What is a trial balance?
It is a list of general accounts and balances. They are placed in the appropriate debit and credit columns.
The total of debits should be equal to the total of credits.
Using accounting software can automate this process ensuring all debits and credits are equal.
A trial balance is drawn together and then used to create an adjusted trial balance.
This is where adjusting entries are added, usually on the last day of an accounting period.
Adjusting entries might include prepayments and outstanding debts if using an accrual accounting system.
Depending on what software is used, it is likely a trial balance will be automatically populated.
Accounting transactions are business activities that impact on the financial statements.
Transactions can take many forms.
Cash Transactions are sales or purchases, paid for by cash, cheque, card payment or other method.
Simply recorded as one of the following:
- debit purchases, credit bank or cash
- credit sales, debit bank or cash
Credit Transactions are when sales or purchases are made on credit meaning payment will follow at a later date.
Recorded in two parts. An entry when goods or services are billed and another when it is paid.
- debit purchase, credit supplier account
- debit supplier account, credit bank
- credit sales, debit customer account
- credit customer account, debit bank
Other types of transactions might include movement of funds such as loans and loan repayments, purchases or assets.
A business owner is legally required to keep a record of all business transactions.
Having a system in place will make recording transactions quick and easy.