Bookkeeping Glossary 2019
Below is our latest glossary for 2019.
This glossary has been put together by multiple experienced bookkeeping experts. If you have a suggestion or would like to contribute tweet us at @AlexilumConnect or get in contact.
If you are looking for bookkeeping advice for your business or organisation contact us now.
You can browse the bookkeeping glossary below or filter it alphabetically by clicking on the alphabet character.

- AccountThis is like a label that is applied to your financial transaction to describe what it is and to make it easy to summarise. For example if you buy pens and paper we might allocate that to the Stationary expense account or when you sell your services we might allocate that to a Consultancy sales account. The individual accounts are categorised as Income, Cost of Goods Sold, Expenses, Assets, Liabilities or Equity.
- AccountingWhile Accounting can incorporate Bookkeeping generally it's that next step further where the focus is on tax advice and tax minimisation which explains why Accountants charge a lot more than Bookkeepers do.
- Accounting PeriodGenerally we break up our financial reporting into set periods of time. As a minimum your financial records will be broken up into Financial Years because that's the period that your tax return will cover. Some other Government Reporting has other set periods that might be Quarterly or Monthly.
- Accounts PayableMoney owed to suppliers for goods or services including stock and equipment. Also see creditor.
- Accounts ReceivableMoney owed from customers generally from sales made for your goods or services. Also see debtor.
- AcquisitionsThings purchases by a business.
- Activity StatementA report provided to the Tax Office. There are two types the Business Activity Statement and the Instalment Activity Statement.
- AssetsRepresents anything that is owned by the business. This can include both tangible things like cash, accounts receivable, stock, equipment, furniture etc and intangible things like trademarks, client lists etc. See also Balance Sheet.
- AuditA detailed analysis by a special type of accountant to determine both the accuracy of your businesses financial records and also that the methodology (ie Double Entry Accounting) is accurate. While a lot of people make this out to be a big scary thing it's a standard process by the Tax Office that is not unusual to occur from time to time.
- Bad DebtsThese are sales you've made but won't get paid for. Once you've decided there is no chance that you'll get the money out of that customer you can write off those invoices as bad debts so you don't have to pay tax on those sales.
- Balance SheetA report that reflects the financial position of a business at a point in time. The report is broken up into three key areas: Assets, Liabilities and Equity.
- Bank ReconciliationThe process of comparing the bank transactions in your Bookkeeping System against your Bank Statement. This is a great way to find any Transactions you've missed entering.
- Bank StatementA report from your bank listing all of your deposits and withdrawals. This is an important document for your Bank Reconciliation.
- BankingThe process of depositing any cash or cheques to your bank account.
- BASA report that you send to the tax office on a regular basis. This report can only be prepared by a registered BAS Agent or Tax Agent and shows information like the sales made, GST Collected and GST paid for a given period. It can also change for different information and may also include things like PAYG and PAYGW. Also see Activity Statement.
- BillingWhere you invoice your customers for sales made to them.
- BookkeepingThis is the process of recording your businesses financial transactions with the goal of making them organised in an efficient and accessible way for reporting and future reference.
- Bookkeeping SystemA program like Xero, MYOB and Quickbooks that is used to record your businesses financial transactions. Because they are purpose built to handle this they have a lot of built in functionality to make this process more accurate and can save a lot of time compiling reports.
- BudgetA process to create a financial plan estimating the amount of income and expenses that will occur in the future. Once complete the budget can be used to not only compare against your actual performance but to also help make key business decisions.
- Business Activity StatementA report that you send to the tax office on a regular basis. This report can only be prepared by a registered BAS Agent or Tax Agent and shows information like the sales made, GST Collected and GST paid for a given period. It can also change for different information and may also include things like PAYG and PAYGW. Also see Activity Statement.
- CapitalThe funds provided to the business by an owner or shareholder.
- Capital GainWhen you sell a Fixed Asset for more than what you paid for it.
- Cash FlowThis describes the amount of actual money coming in from sales (or other activities) or going out for purchases etc. Cash is king in any business, if you are making sales but you haven't been paid yet then you could find yourself in trouble.
- Closing BalanceThis is the final figure for an Account at a given point in time. For example the closing balance on your Bank Statement could be the balance of the account at the end of the month.
- CollateralAn Asset that you put up for a lender to take if you Default on your Loan repayments.
- ContraLet's say you have a Customer that has also provided you with a service so they become a Supplier as well. If they owe you $1,000 and you owe them $750 you could contra the difference and they just pay you $250 to save you both paying each other which might also save on bank fees. This is very common in international transactions.
- Conversion BalanceWhen you are moving to a new Bookkeeping System we enter the balances of each of the Accounts like a summary of all of the transaction that happened to date. By entering a conversion balance you don't have to go through and re-enter all of your old transactions which is not only time consuming but may be unnecessary.
- Cost of Goods SoldThis is a type of expense that represents those costs that are directly related to generating income in your business. Generally this is used when you buy 'goods' or a physical item to then resell. So when I pay for my 'goods' that is a cost of goods sold expense. Also see Profit & Loss Statement.
- Credit NoteThis is like a negative invoice that reduces or cancels out the original Invoice. This can refer to either credit notes provided to a customer to partially or fully refund them for a sale or from a supplier where they are refunding an invoice they sent to you.
- CreditorSomeone who is owed money by your business. Also see accounts payable.
- CreditsThis is a technical term that is part of what we call double entry accounting and forms the basis of the standard of how financial transactions are recorded. The Credit refers to half of a Journal entry. Also see Debit.
- Current AssetsThis is a subset of Assets that have a high Liquidity and can be easily converted to cash.
- Current LiabilitiesThis is a subset of Liabilities and generally represents short term liabilities or those that will generally be paid off in the current Financial Year.
- CustomerSomeone who buys goods or services from your business.
- DebitsThis is a technical term that is part of what we call double entry accounting and forms the basis of the standard of how financial transactions are recorded. The Debit refers to half of a Journal entry. Also see Credit.
- DebtorSomeone who owes your business money. Also see accounts receivable.
- DefaultWhen you haven't made your loan repayment on time.
- DepositCash or Cheques banked to your bank account.
- DepreciationThis is an accounting method to determine the financial aging of assets that your business owns. For example if you buy a new car for $50,000 it won't be worth that in three years’ time, so that drop in value is called depreciation. The Australian Tax Office has determined that not all assets that you buy can be claimed as an expense up front, and so you have to depreciate it over a number of years. The period that an item has to be depreciated over is determined by the ATO.
- DividendWhen part of a company's profits are given to shareholders.
- Double Entry AccountingThis is a technical term that describes the basis of the standard of how financial transactions are recorded.
- DrawingsGenerally this means any money that an Owner takes from the business. Sometimes you'll see this as an Account.
- End of MonthA common Accounting Period when the accounts are Reconciled and Financial Reports are generated.
- EquityThis represents the net financial position of the business. It some ways it could be seen as what the business owes to its owners which is why it's sometimes referred to as Owners Equity. Equity is calculated as Assets - Liabilities = Equity. Also see Balance Sheet.
- ExpensesExpenses are costs which need to be paid out to run your business. Expenses are broken into two categories, Cost of Goods Sold and Overheads though it's not uncommon that overheads are just called Expenses on your financial reports. Also see Profit and Loss Statement.
- Financial StatementsA set of core financial reports generally made up of the Profit & Loss, Balance Sheet and Cash Flow.
- Financial YearGenerally running from June to July the following year in Australia (though it is possible to have different 12 month periods) this is your Accounting Period that your Tax will be calculated on by the tax office.
- Fixed AssetsThese are long term Assets with a low Liquidity like buildings, vehicles, equipment etc.
- Fixed CostsGenerally overheads that need to be paid regardless of how many sales you are making ie rent and subscriptions. See also Variable Costs.
- General LedgerThis is a technical term that represents where all of your journals are summarised and is the basis of all financial reporting.
- Goods and Services TaxThis is an end user or consumer tax paid on most goods and services in Australia.
- GoodwillWhen selling a business this is the difference between the selling price and the value of the Assets that the business owns.
- Gross ProfitThe amount of money made before considering general expenses or Overheads. Generally this is represented by Income less Cost of Goods Sold.
- GSTThis is an end user or consumer tax paid on most goods and services in Australia.
- IASA report that you send to the tax office on a regular basis. This report can only be prepared by a registered BAS Agent or Tax Agent and shows information like PAYG and PAYGW for a given period. It can also change for different information and may also include other items. Also see Activity Statement.
- IncomeMoney that comes from sales made.
- Instalment Activity StatementA report that you send to the tax office on a regular basis. This report can only be prepared by a registered BAS Agent or Tax Agent and shows information like PAYG and PAYGW for a given period. It can also change for different information and may also include other items. Also see Activity Statement.
- InterestBasically this is the cost of borrowing money whether that is as a traditional loan, a lease or a mortgage.
- InventoryIf you buy goods to sell again, those ones that you've bought but not yet sold is your inventory. Because it's something your business owns it is called an Asset.
- InvestmentMoney used to generate a profit. This could be a direct investment in things like shares or property or it could be an indirect investment like new equipment for a business so it can run more efficiently with the intention of achieving higher profitability.
- InvoiceA document that has the details of a sale on it. This could be an invoice that you provide to a customer for a sale you made or from a supplier for a sale they made to you.
- JournalThis is a technical term that represents a financial transaction. Accounting standards and systems determine how we should store financial information including the structure of the journal entry. You can think of this more as how your financial transactions are stored in the 'back end' as programs like Xero, MYOB and Quickbooks generally hide this from users for simplicities sake.
- LeaseA contract for a type of loan allowing you to use an Asset without paying for it up front. You may also have the option of owning that item through a Residual payment at the end of the lease term.
- LedgerThis is a technical term that describes where the Journals are stored.
- LiabilitiesRepresents anything that the business owes to others like accounts payables, loans from banks, unpaid superannuation and taxes etc. See also Balance Sheet.
- LiquidateThe process of converting Assets to cash. Also see Liquidity.
- LiquidityHow easily an Asset can be sold or converted into cash.
- LoanMoney borrowed from someone else like a bank. Generally you will pay Interest as a cost for borrowing that money.
- Mark-upThe amount of money you add to your cost price of a good that you sell. Sometimes mixed up with a Margin but it's from a different perspective.
- MYOBA well known Bookkeeping System in Australia.
- Net LossWhere you have more expenses than income in your Business.
- Net ProfitWhere you have more income than expenses in your business.
- Non-Cash Working CapitalThis is similar to Working Capital except you exclude all cash items from the calculation.
- Opening BalanceWhen looking at Account transactions rather than going through every single one over its history we may just start with an Opening Balance that represents those historical transactions to that date.
- OverdraftA type of short term loan that allows you to spend more money than you have in your bank account. Generally when you apply for an overdraft facility there will be a set amount you can take out.
- OverheadsOngoing business Expenses that are not related to direct costs like Cost of Goods Sold.
- Pay as You GoThis represents the amount of tax paid in advance to the tax office on behalf of the business to go towards their next tax bill. This is generally calculated on your BAS.
- Pay as You Go WitholdingThis represents the amount of tax you withhold from an employee's pay to give to the tax office on their behalf.
- PayableAmounts that need to be paid. Also see Accounts Payable.
- PayeeA company or individual who you will be paying.
- PAYGThis represents the amount of tax paid in advance to the tax office on behalf of the business to go towards their next tax bill. This is generally calculated on your BAS.
- PAYGWThis represents the amount of tax you withhold from an employee's pay to give to the tax office on their behalf.
- PayrollThis is the process of how a business pays its employees. This only describes payroll at a very high level as there are many steps to doing payroll.
- Petty CashCash kept within the business to pay for incidental expenses ie milk, coffee etc.
- PostingAnother term for recording a Transaction.
- Profit and Loss StatementA financial report that represents the businesses financial performance over a period of time. It's broken into three main areas including Income (sometimes called Revenue), Cost of Goods Sold and Expenses with the net result showing either a profit or loss. Also called an Income Statement.
- Profit MarginGenerally calculated as a percentage that is the difference between your selling price and buying price for goods. Sometimes mixed up with a Mark-Up but it’s from a different perspective.
- QuickBooksA well known Bookkeeping System in Australia.
- ReceiptA written confirmation that you've received payment from a customer, sometimes showing additional charges as part of that payment ie EFTPOS transaction fees.
- ReconcileA process of checking or validating financial transactions to make sure they are correct. This could also be called a Reconciliation.
- RefundWhen you pay back a Customer after being overpaid or if you have provided a Customer with a Credit Note after they paid the original invoice.
- ReimbursementWhen you pay back an employee after they've paid for something on behalf of the business.
- RemittanceA written document that notifies a supplier that a payment has been made. This is especially helpful if you are paying multiple invoices in the one payment so they know which ones have been paid.
- ResidualSometimes called a balloon payment this is a lump sum amount that needs to be paid at the end of a lease to actually buy out the equipment.
- Return on Investment (ROI)The Net Profit you will get back on an Investment.
- RevenueMoney collected (or promised) for the sale of your goods or services. Also see Profit & Loss Statement.
- SalaryA fixed amount of pay (generally per year) rather than based on the hours worked by an employee. Also see Payroll.
- SalesThe best part of being in business, when someone is willing to pay you to provide them with a good or service. Note that the sale is only the first part; you still need to get paid which is the Income part.
- Statement of Cash FlowsA Financial Statement that reports on the cash coming in and going out of the business. This report is often undervalued but can be much more important that the Profit & Loss. Also see Cash Flow.
- SuperannuationA Government mandated entitlement for employees in Australia to invest a portion of their Wages with the purposes of supporting their living expenses after retiring.
- SupplierSomeone who you buy goods or services from.
- TaxFunds paid to the Government, generally calculated based on your Net Profit.
- TransactionThis is basically when you record a financial event ie you made a Sale or paid for an Expense. Also see Journals.
- Trial BalanceThis is a technical report used to double check the accuracy of the journals that have been entered into the bookkeeping system.
- Undeposited FundsMoney that you've received but haven't banked yet.
- Unpresented ChequeThis is a cheque that you've received but haven't banked yet.
- Unsecured LoanA type of loan that does not have any Collateral.
- Variable CostsCosts that can vary depending on the amount of sales you make. See also Fixed Costs.
- VendorSee Supplier.
- WagesThe cost of engaging an employee, basically what you pay them for their time.
- WithdrawalMoney taken from your bank account.
- Working CapitalCalculated by your Current Assets less your Current Liabilities this represents how easily your business will be able to service or pay off your debts.
- XeroA well known Bookkeeping System in Australia.
- Year EndGenerally we're talking about the end of the Financial Year. This is an important reporting period as it will form the basis of any Taxes you have to pay.