Part 5: GLOSSARY OF TERMS

Transcription

1 Part 5: GLOSSARY OF TERMS ABN Withholding Tax Account Levels Accounts Accounting Equation Accounts List Accounts Payable Accounts Receivable Accounting Period The amount withheld from a supplier who provides either an invoice or tax invoice where the elevendigit Australian Business Number (ABN) has not been quoted. The entity is required to deduct and remit 48.5% of the gross amount of the invoice to the ATO on the next Business Activity Statement (BAS). The Accounts List (or Chart of Accounts) in MYOB has four account levels available for each type of it s accounts. The highest level is Level 1 and the lowest is Level 4. Each level is summarised in the level above it by one or more header accounts. Records of financial transactions relating to or associated with a business. An algebraic expression of the equality of assets to liabilities and members equity. It is expressed as: Assets = Liabilities + Equity. Otherwise referred to as the Chart of Accounts. This is a list of general ledger accounts. It is an option under Accounts command centre by which you can view, create new, edit, or delete accounts. You can also enter new opening balances, establish budgets and enter historical information for accounts. Otherwise known as trade creditors. This account represents amounts owed by the business to suppliers for the goods and services purchased on credit. Usually shown as a current liability in the Balance Sheet. Otherwise known as trade debtors. This represents amounts owed by customers for goods or services sold on credit. Usually shown as a current asset in the Balance Sheet. A period of time covered by a set of financial statements. QuickBooks Training Manual 5-1 Part 5: Glossary of Terms

2 Accounting Principles Rules which guide in the measurement, classification and interpretation of financial information Accrual Basis of Accounting Accumulated Depreciation Aged Debtors Analysis Aged Creditors Analysis Annual Report Assets Attribution Audit Australian Business Number The method of recording transactions which reports revenues in the period in which they are earned rather than received, and expenses in the period in which they are incurred rather than paid. The amount of depreciation that has been recorded and accumulated on a non-current asset since it was acquired. It is usually recorded in a contra account. Also referred to as an Aged Receivables Summary in MYOB. The process of classifying accounts receivable on the basis of length of time that they have been outstanding. Also referred to as an Aged Payables Summary in MYOB. The process of classifying accounts payable on the basis of length of time that they have remained unpaid. An annual document summarising information about the operations and financial position of an organisation for the financial year. Future economic benefits controlled by the entity as a result of past transactions. Attribution rules determine which tax periods your GST payable and GST receivable are attributed to. An entity can choose one of two attribution methods of accounting for the GST: the cash method and the non-cash (or accruals) method. A review of the annual accounts, usually carried out by an independent person or firm of accountants. Otherwise referred to as the ABN. A unique elevendigit number given to each business entity which has registered for the goods and services tax (GST). QuickBooks Training Manual 5-2 Part 5: Glossary of Terms

3 Bad Debts Balance Sheet Bank Reconciliation Budget Business Activity Statement Cash Basis of Accounting Contra Account Cost Centre Creditor Current Assets Current Liabilities Otherwise known as uncollectable debts. The amount of accounts receivable that the management committee have concluded are uncollectable. Usually written off in the Profit and Loss Statement. Otherwise known as the Statement of Financial Position. The Balance Sheet shows the entity s assets, liabilities and member s equity at the end of the end of the reporting period. A statement showing the difference between bank account balances and the cash at bank balance shown in the Balance Sheet. A detailed estimate of the planned income and expenses for the next financial period expressed monthly. Otherwise referred to as the BAS. A pre-printed document issued by the ATO either monthly or quarterly which summarises the amounts of GST payable and receivable and a range of other taxes including PAYG Withholding and ABN Withholding Tax. The method of recording transactions which reports revenues in the period in which the cash is received and expenses in the period in which the cash has been paid. An account that is deducted from a related account. For example, Motor Vehicles at cost and Less: Accumulated Depreciation. A program or organisation which has all its costs and income grouped together in order to measure and monitor performance. See Accounts Payable. Cash and other types of assets of the entity that would reasonably be expected to be converted to cash, sold or consumed by the business entity within twelve months after the end of the last financial year of the entity. Obligations of the entity that are reasonably expected to be settled or paid within twelve months after the end of the last financial year of the entity. QuickBooks Training Manual 5-3 Part 5: Glossary of Terms

4 Debtor Deficit Depreciation See Accounts Receivable. Otherwise known as a net loss. The excess of total expenses over total revenues for the entity over the reporting period. The allocation of the cost of an asset over its estimated useful life. Depreciation recognises that an asset is subject to wear and tear over its useful life. All non-current assets are depreciated, except land. Depreciation Schedule A schedule (usually an EXCEL spreadsheet) showing the amount of depreciation for each asset. Equity Expenses Financial Statements Fringe Benefits Tax Fixed Asset Register Fund Goods and Services Tax GST-Free Supply The amount of member s funds. Calculated as the difference between total assets and total liabilities. In the case of a club, often referred to as Members Equity. A loss or outgoing incurred by the entity during the reporting period. Comprises the Profit and Loss Statement, Balance Sheet, Statement of Cash Flows and Detailed Notes to the Accounts. Fringe benefit tax (FBT) is a tax payable by the employer on the total value of fringe (or non-cash) benefits provided to employees or their associates during the FBT year. The FBT year starts on 1 April and ends on 31 March. A schedule (usually an EXCEL spreadsheet) showing each asset that is owned by the entity. An account set up to show monies received for specific purposes. GST is a broad-based tax of 10% on the supply of most goods, services and anything else consumed in Australia, and the importation of goods into Australia. A GST-free supply is one in which the supplier is not required to charge the 10% GST to the customer. However, the supplier can claim back the GST paid on any purchases made in making the supply. QuickBooks Training Manual 5-4 Part 5: Glossary of Terms

5 GST Payable GST Receivable Input Tax Input Tax Credits Input Taxed Supply In-Kind Internal Controls Inventory Invoice Investments Liabilities The amount of GST collected by the entity from the sale of goods and services to customers. Also known as an input tax credit. The amount of GST paid by the entity on the acquisition of goods and services from suppliers. The GST paid or payable on the inputs to your business, i.e. acquisitions of goods and services in the course of operating the business. An input tax credit is what you claim to get back the GST you pay in the price of goods and services you purchase for your business or enterprise. You will need to have a tax invoice to claim an input tax credit (except for purchases for $50 or less). An input-taxed supply is one where the supplier is not required to charge the 10% GST to the customer. However, unlike a GST-free supply, the supplier is not able to claim an input tax credit on the inputs used to produce the input-taxed supply. Services or goods provided to the club without a cost involved. Methods and procedures collectively adopted by an entity to safeguard its assets and to ensure that the financial information is accurate and reliable. Goods or property acquired by the entity for the purposes of resale within the ordinary course of business. Includes food, drinks and merchandise. A document issued by a supplier who is not registered for the GST. This document must still have an ABN, otherwise the payer is required to withhold 48.5% of the gross amount and remit to the ATO on the next BAS. Assets held by the entity for investment purposes, rather than for use in the normal activities of the entity. Future sacrifices of economic benefits that an entity is presently obliged to make to other external entities as a result of past transactions. QuickBooks Training Manual 5-5 Part 5: Glossary of Terms

6 Liquidity Net Loss Net Profit Net Amount Non-Current Assets Non-Current Liabilities Pay As You Go Instalments Pay As You Go Withholding Prepayment Profit & Loss Statement The ability of an entity to satisfy its short-term financial obligations. See Deficit. See Surplus. The net amount of GST that must be paid to the ATO on the next BAS. Calculated as the difference between GST Payable and GST Receivable. Assets other than current assets. Assets of the entity which would not be expected to be converted to cash, sold or consumed by the business entity within twelve months after the end of the last financial year of the entity. Liabilities other than current liabilities. Obligations of the entity that do not require payment within twelve months after the end of the last financial year of the entity. PAYG instalments is a system for paying income tax on the entity s profit progressively over the financial year. This amount is based on the sales of the relevant quarter multiplied by a predetermined instalment rate advised by the ATO. Not applicable for entities that are exempt from income tax exempt (eg. clubs). PAYG withholding is the amount withheld in respect of payments made to employees in the form of salaries and wages, commission, bonuses or allowances and directors fees. payments for a supply (goods or services) to another business that does not quote an ABN, and certain dividend, interest and royalty payments. A payment in advance for goods or services that will be consumed by the entity in the next reporting period. For example, prepaid insurance and prepaid advertising. Usually shown as a current asset in the Balance Sheet. A financial report listing the revenues, expenses and net profit/surplus or net loss/deficit of an entity for the reporting period. QuickBooks Training Manual 5-6 Part 5: Glossary of Terms

7 Reconciliation Reducing Balance Reserves Revaluation Revenues Statement of Cash Flows Ensuring two or more balances agree, often used in reference to checking bank balances with the accounting system. The reducing balance method involves applying a percentage rate initially to the original cost of the item, but subsequently to the written down value at the commencement of each year thereafter. The reducing balance depreciation rate is calculated as dividing 150% by the useful life of the item. Amounts set aside to provide future programs or to act as a buffer against changing circumstances. The increase or decrease in the value of a noncurrent asset. Often the result of comparing its book value with its market value. This increase or decrease is booked to the Asset Revaluation Reserve. Income derived by the entity from the sale of goods or services during the reporting period. A financial statement which reports the cash inflows and outflows of an entity during the financial year. These cash inflows and outflows are classified into operating, investing and financing activities. Straight-Line The straight-line depreciation method involves applying a percentage rate to the original cost of the item and continuing on the same basis each year until fully written off. The straight-line depreciation rate is calculated as dividing 100% by the effective life of the item. Supply Surplus Supply is a very broad term and includes the supply of services, provision of advice or information, a grant, assignment or surrender of real property, a creation, grant, transfer, assignment, a financial supply and an entry into or release from, an obligation to do anything, to refrain from an act, or to tolerate an act or situation. Not all supplies are taxable. Otherwise known as a net loss. The excess of total revenues over total expenses for the entity over the reporting period. QuickBooks Training Manual 5-7 Part 5: Glossary of Terms

8 Taxable Supply Tax Invoice Tax Period Transaction Trial Balance Useful Life A taxable supply is one where the supplier is required to charge the 10% GST to the customer. However, the supplier can claim back the GST paid on any purchases made in making the supply. A document issued by a supplier who is registered for the GST. This document should have the supplier s ABN and the amount of GST included in the supply. A tax period is a period for which an entity calculates its GST and lodges its BAS. A tax period is either quarterly or monthly depending on the entity s annual turnover. Quarterly tax periods of three months end on 30 September, 31 December, 31 March and 30 June. Monthly tax periods end on the last day of each calendar month. The BAS must be lodged within 28 days after the end of the relevant tax period.. A financial event which results in an entry in the accounts. A statement listing all of the accounts in the general ledger and their respective debit and credit balances. A trial balance is prepared to verify the equality of debits and credits made to the accounts. The estimated period of time (usually expressed in years) that a non-current asset is expected to be used by the entity. This is used in determining the amount of depreciation of non-current assets. QuickBooks Training Manual 5-8 Part 5: Glossary of Terms