Keeping up with your bookkeeping can be a hard task, especially if you’re a small business owner and wear many hats. From crafting monthly operating statements to balance sheets, budgets, and financial graphs, having a qualified accounting firm to assist you with your bookkeeping can make all the difference.
We’ve helped numerous clients in a variety of industries get their books in shape with our bookkeeping services, so we wanted to define some common vocabulary you’ll run across in bookkeeping whether you’re doing it yourself or outsourcing.
Frequently Asked Bookkeeping Questions:
What is Accounts Receivable?
“Accounts Receivable” refers to money that customers owe to your company for goods or services. Frequently, these goods or services are purchased on credit, meaning the customer did not pay for them immediately.
For example, you’re a marketing firm and Bill’s Burger Restaurant owes you $1,000 for marketing services you completed to advertise their grand opening. You send an invoice to Bill’s Burger Restaurant to pay for your services.
What is Accounts Payable?
Conversely, “Accounts Payable” is the debt you owe other companies when from purchasing goods or services from them.
For example, you’re a florist who purchases $500 worth of flowers from your supplier Fiona’s Flower Supply. You do not pay at the time of delivery, but receive an invoice for your debt of $500 that you have 90 days to pay.
What is the difference between current and fixed assets?
“Current Assets” are short-term assets that a company expects to use up or sell within a year, while “Fixed Assets” refers to long-term assets a company does not plan to use up or sell for some time.
Current Assets include items like cash, inventory, and short-term investments. Fixed Assets include property, equipment, software, vehicles, patents, copyrights, and trademarks.
What is the difference between cash and accrual accounting methods?
The difference between cash and accrual methods of accounting lies in when income and expenses are recorded.
With cash method accounting, income and expenses are recorded when cash is actually collected or distributed. On the other hand, with an accrual accounting method, income and expenses are recorded when they are incurred–not when they are paid or collected.
Cash method accounting is a huge benefit to manufacturing businesses and any business with inventory, as come tax time businesses can deduct the cost of inventory when they pay for it versus when that inventory is sold.
Need assistance with your bookkeeping?
Bogged down in the day-to-day activities of bookkeeping? Don’t have enough time to dedicate to running your business? Whether you just need some help with bookkeeping or you’re looking to have your bookkeeping outsourced completely, our team of accountants are here to help!
At Robert Hall & Associates, we provide clients with innovative, yet practical bookkeeping solutions to help improve profitability! Contact us at 818-242-4888 or fill out our contact form to discuss how we can help streamline your accounting process.