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Accounting
Bookkeeping, financial statements, tax and the accounting treatment of payroll - debits and credits through to the income statement and balance sheet.
Account (ledger) An account is a single record in the ledger tracking one type of asset, liability, income, expense or equity, holding its running balance.Accounting period An accounting period is the span of time - a month, quarter or year - that a set of accounts is closed and reported for.Accounts payable Accounts payable is the money a business owes its suppliers for goods or services it has received but not yet paid for - its trade creditors.Accounts receivable Accounts receivable is the money customers owe a business for goods or services it has delivered but not yet been paid for - its trade debtors.Accrual accounting Accrual accounting recognises income and expenses when they are earned or incurred, not when cash changes hands.Aged analysis An aged analysis breaks down debtor or creditor balances by how long they have been outstanding, typically in 30-day bands.Amortisation Amortisation is the spreading of the cost of an intangible asset, such as software or a patent, over its useful life - the intangible counterpart of depreciation.Asset An asset is a resource a business controls as a result of past events and expects to bring future economic benefit, such as cash, equipment or money owed by customers.Audit An audit is an independent examination of a business's financial statements, resulting in an opinion on whether they fairly present its results and position.Balance sheet The balance sheet is the snapshot of what a business owns, owes and is worth at a single point in time - its assets, liabilities and equity.Bank reconciliation A bank reconciliation matches the business's own cash book to the bank statement and explains every difference between them.Capital Capital is the funds owners contribute to a business, or more broadly the money a business has available to invest and operate with.Cash Cash is money held in notes, coins or a bank account that is immediately available to spend - the most liquid current asset on the balance sheet.Cash accounting Cash accounting recognises income and expenses only when cash is actually received or paid, ignoring amounts owed or prepaid.Cash flow statement The cash flow statement reports the actual movement of cash through a business over a period, split into operating, investing and financing activities.Chart of accounts A chart of accounts is the structured list of every account a business posts to, grouped by type, that defines the shape of its books.Closing balance A closing balance is an account's balance at the end of a period, which becomes the opening balance of the next period.Control account A control account is a general-ledger account whose balance equals the total of a subledger, used to reconcile detailed records to the summary.Corporate income tax Corporate income tax (CIT) is the tax a company pays on its taxable income, declared annually on the ITR14 return.Cost of employment Cost of employment is the employer's total expense for an employee, including salary, employer contributions and benefits, posted to the general ledger.Cost of sales Cost of sales is the direct cost of the goods or services a business sold in a period - the cost that is matched against revenue to give gross profit.Credit (accounting) A credit is the right side of an accounting entry; it increases liabilities, income and equity and decreases assets and expenses.Credit note A credit note is a document reducing or reversing a previously issued invoice, used for returns, discounts or billing corrections.Current asset A current asset is one a business expects to realise, sell or use up within twelve months, such as cash, inventory and amounts owed by customers.Current liability A current liability is an obligation a business must settle within twelve months, such as trade creditors, unpaid PAYE and UIF, and net pay owed to employees.Debit A debit is the left side of an accounting entry; it increases assets and expenses and decreases liabilities, income and equity.Deferred income Deferred income is cash received before the related goods or services are delivered, held as a liability until it is earned.Depreciation Depreciation is the accounting method of spreading the cost of a tangible fixed asset over its useful life, recognising a portion as an expense each period.Dividends tax Dividends tax (DWT) is a withholding tax on dividends a company pays to its shareholders, currently 20%, withheld by the company or a regulated intermediary.Double-entry bookkeeping Double-entry bookkeeping is the principle that every transaction is recorded in at least two accounts, with total debits always equalling total credits.EBITDA EBITDA stands for earnings before interest, tax, depreciation and amortisation - a measure of operating profitability that strips out financing, tax and non-cash write-downs.Equity Equity is the residual interest in a business after its liabilities are deducted from its assets - the owners' stake, made up of capital contributed plus retained profit.Expense An expense is the cost of the resources a business uses up in earning revenue, such as salaries, rent and electricity, recognised in the period they are incurred.Financial statements Financial statements are the formal set of reports - income statement, balance sheet and cash flow statement - that present a business's results and financial position for a period.Financial year A financial year is the 12-month period a business reports its results on; it need not match the SARS tax year.Fixed asset A fixed asset is a long-lived tangible asset a business uses to operate - property, plant, equipment and vehicles - rather than holding it for resale.General ledger The general ledger is the complete record of a business's financial transactions, including the payroll journal entries that post salary expense, statutory liabilities and cash movements each pay run.Going concern Going concern is the assumption that a business will continue operating for the foreseeable future, which underpins how its accounts are prepared.Gross profit Gross profit is revenue less the cost of sales - what a business has left from its sales before operating expenses, interest and tax are taken off.Gross remuneration Gross remuneration is the total of all an employee's earnings before any deductions, the starting figure PAYE, UIF and SDL are all calculated from.IFRS IFRS, International Financial Reporting Standards, are the accounting rules governing how transactions are recognised, measured and disclosed in financial statements.Impairment Impairment is writing an asset down when its recoverable amount falls below the value at which it is carried in the books, recognising the drop as an expense.Income statement The income statement reports a business's income less its expenses over a period, ending in the profit or loss for that period.Input VAT Input VAT is the VAT a registered vendor pays on its business purchases and can claim back from SARS against the VAT it charges on sales.Internal audit Internal audit is an in-house function that reviews a business's controls, risk management and governance, independent of operational management.Inventory Inventory is the goods a business holds for sale or for use in production, carried as a current asset until sold, when its cost becomes cost of sales.Invoice An invoice is a seller's request for payment listing the goods or services supplied, the amounts due and any VAT charged.Journal entry A journal entry is a single dated record of the debits and credits for one transaction, captured before it is posted to the ledger.Matching principle The matching principle recognises expenses in the same period as the revenue they helped earn, so each period's profit reflects its true cost.Materiality Materiality is the threshold above which an omission or error in the accounts would change a reader's decisions, guiding how much precision is needed.Net pay Net pay is the amount an employee actually receives after PAYE, UIF and all other deductions are subtracted from gross remuneration.Net profit Net profit is what remains after every expense, including interest and tax, is deducted from revenue - the bottom line of the income statement.Non-current asset A non-current asset is one a business holds for longer than twelve months, such as property, equipment and vehicles used to run the business rather than for resale.Non-current liability A non-current liability is an obligation a business does not have to settle within twelve months, such as long-term loans and finance leases.Notes to the financial statements The notes to the financial statements are the narrative and detailed breakdowns that explain and support the figures shown on the face of the statements.Opening balance An opening balance is an account's balance at the start of a period, carried forward from the close of the prior period.Operating profit Operating profit is the profit a business makes from its core operations after operating expenses but before interest and tax - also called EBIT.Output VAT Output VAT is the VAT a registered vendor charges on its sales and must pay over to SARS, net of any input VAT it can claim.Payroll accounting Payroll accounting is how the figures from a pay run flow into the books - the journals, ledger accounts and liabilities that record the cost of employing people.Payroll accrual Payroll accrual is recognising payroll cost in the period it is earned, even if the actual payment falls in a later period.Payroll clearing account A payroll clearing account is a temporary general-ledger account that holds net pay between when a payroll run is processed and when the bank payment clears.Payroll journal A payroll journal is the accounting entry that records a pay run's gross pay, deductions and employer costs in the general ledger, splitting cash, liability and expense accounts correctly.Payroll liability account The payroll liability account is the GL account holding amounts an employer owes to SARS and funds - PAYE, UIF, SDL and contributions - until they are paid over.Petty cash Petty cash is a small physical cash float kept on hand to pay minor, low-value expenses without going through the full payment process.Posting Posting is the act of transferring journal entries into the ledger accounts they affect, updating each account's running balance.Prepayment A prepayment is an expense paid in advance and carried as an asset until the period it actually relates to.Profit Profit is what remains when expenses are deducted from revenue - the umbrella term covering gross profit, operating profit and net profit at successive stages of the income statement.Provision A provision is a liability of uncertain timing or amount, recognised when a business has a probable obligation it can reasonably estimate.Provisional tax Provisional tax is income tax paid in advance, in two or three instalments during the year, by companies and certain individuals, using the IRP6 return.Retained earnings Retained earnings are the cumulative profits a business has kept rather than paid out to owners, accumulated within equity on the balance sheet.Revenue Revenue is the income a business earns from its main operating activities - the sales of goods or services - before any costs are deducted.Salary control account The salary control account is the general-ledger control account that reconciles the total net pay owed across all employees to what is actually paid out.Statement of changes in equity The statement of changes in equity reconciles a business's opening equity to its closing equity, showing the profit retained, capital raised and distributions made during the period.Subledger A subledger is a detailed ledger, such as debtors or creditors, whose total rolls up into a single control account in the general ledger.Third-party payments Third-party payments are amounts a payroll run withholds and forwards to SARS, retirement funds, medical aids and other parties on the employee's behalf.Trial balance A trial balance is a list of every account's balance, proving that total debits equal total credits before the financial statements are drawn up.VAT VAT, value-added tax, is South Africa's consumption tax charged on most goods and services, currently 15%, collected by vendors and paid over to SARS.VAT201 The VAT201 is the SARS return a registered vendor submits each tax period declaring output VAT, input VAT and the net amount due or refundable.Working capital Working capital is current assets less current liabilities - the short-term funds a business has available to meet its day-to-day obligations.
