Accountancy – The recording and interpreting of, e.g., a company or individual’s finances, to allow the determining of profit or loss… (Longman Dictionary).
Sometimes the accountancy “lingo” is so intimidating, that a person just feels like running off into the hills when financial discussions start. We, at Red Dot Now, want to help our clients and readers to feel less intimidated and more equipped to join and understand the financial jargon. Therefore, the next few blogs will be something in the line of “Accountancy Terms for Dummies”. (For an exhaustive list, see the website.)
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Abatement
This is a form of rebate, penalty reduction, or tax decrease. Businesses or individuals can ask tax authorities for abatements in cases where they have overpaid their taxes, or have received a tax bill which is questionably high.
Absorption Costing
Absorption Costing, also known as “full costing”. This is a managerial accounting method, whereby all costs in relation to the manufacture of a certain product, are captured. This method is used when accounting for all costs involved, (direct and indirect), ie: direct labour, direct materials, rent, insurance, etc.
Accelerated Depreciation
Any method of depreciation used for accounting or income tax reasons, which permits higher depreciation expenses in the early stages of an assets life, is known as Accelerated Depreciation. This is when methods like double-declining balance (or DDB), is implemented, meaning greater depreciation costs in the early staqes of an assets life, and lower expenses as the asset ages; which is contrary to the straight-line depreciation method, whereby the cost is spread out evenly throughout the life of an asset.
Account
A record in the general ledger, which is used to collect and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. A company selling merchandise on credit, will record these sales in a Sales account, and in an Accounts Receivable account.
Accounts Payable
Accounts Payable applies to goods bought on credit, and treated as a short-term debt payment, which must be paid to avoid default. As this is a liability, it falls under “Current Liabilities”.
Accounts Receivable
A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days, or (b) 2/10, n/30; signify that a sale was made on account and was not a cash sale.
Audited Financial Statements
Financial statements that bear the report of independent auditors attesting to the financial statements’ fairness, and compliance, with generally accepted accounting principles.
Red Dot Now provides accounting, payroll and tax compliance services using the best of breed online technology.
Should you want to discuss this or any of their services further, contact Ryan Coates on e-mail at ryan@reddotnow.co.za