These are some common words or jargon you should
familiarise yourself with before you visit an Accountant:


Assets / Liabilities – Assets are things of value. Examples of assets are accounts receivable, debtors, furniture, fixtures and bank accounts. Liabilities are what you owe creditors. Examples are accounts payable, creditors, payroll taxes payable, and loans payable.

 

Balance Sheet – Also called a “statement of financial position” it is a financial “snapshot” of your business at a given point in time. It lists your assets, your liabilities, and the difference between the two, which is your equity, or net worth.

 

Creditors – A company or individual whom you owe money.

 

Debtors – A company or individual who owes you money.

 

Depreciation – An annual write-off of a portion of the cost of fixed assets, such as vehicles and equipment. Depreciation is listed among the expenses on the income statement.

 

Fixed Assets – Assets that are generally not converted to cash within one year. Examples are equipment and vehicles.

 

Capital – Money invested in the business by the owners, also called equity.

 

Financial Reports / Annual Accounts – Summary of results for the year.

 

GST – Goods and Services Tax, currently 15% in NZ.

 

Provisional Tax – Provisional tax is not a separate tax but a way of paying your income tax as the income is received through the year. You pay instalments of income tax during the year, based on what you expect your tax bill to be. The amount of provisional tax you pay is then deducted from your tax bill at the end of the year. If you had income tax of more than $2,500 to pay at the end of any tax year you may have to pay provisional tax for the following year to avoid interest or penalties.

 

Ledger / Journals – The chronological, day-to-day transactions of a business are recorded in sales, cash receipts, and cash payment journals. A general journal is used to enter period end adjusting and closing entries and other special transactions not entered in the other journals.

 

Inventory (Stock) – Goods you hold for sale to customers. Inventory can be merchandise you buy for resale, or it can be merchandise you manufacture or process, selling the end product to the customer.

 

Profit and Loss – Also called an “Income Statement” or ‘Statement of Financial Performance”. It lists your income, expenses, and net profit (or loss). The net profit (or loss) is equal to your income minus the expenses incurred in producing that income. This links to the balance sheet by an increase or decrease to capital.

 

Trial Balance – A list of the categories (or general ledger accounts) and their totals, in which the debit or credit balance must run to zero.