Terms of Reference:
The language of the banking, taxation and economy can be confusing or just plain strange to the uninitiated.
v Assets – what you own v Liability – what you owe v Income – what you are earning v Expense – what is it costing you to earn the income
v Equity – earnings after expense plus what you have put into or taken away from the business
v Debit –(always left column of the ledger sheet) a transaction against a ledger :
Ø Assets including Bank – you are putting money in
Ø Liability– you are increasing what you owe
Ø Income – you are losing income
Ø Expense – you are gaining a usable supply
Ø Equity – you are taking out of your pocket and putting it into your business
v Credit –(always right column of the ledger sheet) a transaction against a ledger:
Ø Assets including Bank – you are taking money out
Ø Liability – you are decreasing your debts
Ø Income – you are making money
Ø Expenses – you are reducing you costs.
Ø Equity – you are putting money in your pocket and taking it from you business
v Accounts – a place to allocate any of the above
v Ledger – the data sheet of the accounts
v Bank Statement – a ledger data sheet of the transaction per account that you own in the bank
v Credit Card Statement – a ledger data sheet of the transactions per account that owe to the company
v Income statement – a report of the accounts of income and expenses
v Balance Sheet – a report of the accounts of assets, liabilities, and equity
v Invoice – the document you present to a client for payment of services or goods and what you receive from a contractor or supplier for services or goods
v Receipt – a document that shows payment of goods or services – can be the same as an invoice but should not be considered to be an invoice when there is only the confirmation of payment transaction.
v Capital Cost – a item that is purchased by you or your business that has a long term use
v Depreciation – a deemed cost based on a prorated value of use per year for Capital Costs
v Proration – the relation of a given amount to 100.00 – a duel valuation of the expense based on time, usage or similar cost allocation.
v Legislation – an act or statute of government to implement rules of conduct, process and taxation
Date – this is a little understated as it is only the Date. However the date of the transaction is a determining value in the processing of all of the above. For this purpose I will use the date system of month/day/year. Be forewarned that there is no legislation in the implementation of the date in the receipt or invoice. So have fun with this – no amount of patience can unravel the date of 07/03/09 on the lone receipt that resurfaces after a year or more of collecting dust at the bottom of the cupboard! And yes, the size of the receipt is not necessarily the issue; big ones do this as well as the small receipts (size and value). It is a part of humanity that we really need to accept – we lose things and they sometimes come back. If we are organized and aware of this – we can spot the whole in the accounts that this missing invoice.