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Basic Bookkeeping Terms Explained
Every sector on the planet comes with its own unique language, familiar to those who work in it and almost incomprehensible to everyone else!
Terms used in financial roles can seem particularly tricky for newcomers, so we thought we’d bust some jargon and make the world of bookkeeping easier to understand.
Whether you’re reading job descriptions or course information, here are some of the more common terms you may come across:
These are the things owned by the company, such as money, buildings, land, equipment and vehicles.
This is a financial statement that gives information about an organisation’s financial position on a particular date. It takes its name from the fact that the company’s assets (see above) must equal its liabilities and equity (see below).
These may sound like something from a cheesy fantasy novel, but are actually the books or records where types of transaction are initially recorded. The most common are the cash book, day book and journal (see below).
This is a record of all cash receipts and payments that a company has made.
In accounting and bookkeeping, this is the process of assigning numbers or letters to different types of data to make it easier to search for. There is no set way of doing this and every bookkeeper and business will have a system that works best for them.
An account book in which transactions are added on a daily basis, like a journal (see below).
The double entry bookkeeping system is over 500 years old and requires that every transaction is recorded in at least two accounts. For example, if the company takes out a loan it will be recorded in both Cash and Loans Payable accounts, as it received money but now has to pay it back.
This is the money that has been invested in a business by its owners, along with profits that have been reinvested in the company rather than paid out to the owners.
The cornerstone of the bookkeeping system! This is the place where all the company’s accounts are summarised.
You can probably guess this one – this is where bookkeepers keep records of daily company transactions, just like a diary. To keep it simple, most of the company’s most active accounts will have their own journal.
These are the debts that the company owes, such as unpaid bills and loans.
This is an accounting process that compares figures across two sets of records to ensure they match up. For example, it can be used to confirm that the amount of money recorded as leaving an account is the same as the amount that has been spent.
Bookkeepers use this to test that the entries in a company’s bookkeeping system are correct before they compile their financial reports.
Want to find out more about bookkeeping? You can find a range of courses on our bookkeeping pages. Alternatively, call us on +44 (0) 20 3198 7700 to speak to one of our Career Consultants today, to discuss your career goals or get started.
