Sometimes the terms that accountants and bookkeepers use can sound very alien to your needs to get your finances in order. This article aims to demystify those terms and to offer you a way forward through the jungle of jargon! No more will you be reeling in befuddlement. Never again will you reel in confusion. Oh no! Not you. You will be able to smile calmly in the knowledge that no-one can fox you by using terms such as 'Deferred expenditure' and 'Gearing'.
Some people may think that 'gearing' refers to what type of jeans you are wearing this summer! But really it means this: 'Gearing (AKA: leverage): The comparison of a company's long term fixed interest loans compared to its assets. In general two different methods are used: 1. Balance sheet gearing is calculated by dividing long term loans with the equity (or proprietor's net worth). 2. Profit and Loss gearing: Fixed interest payments for the period divided by the profit for the period.'
Similarly, accounting terms such as 'above the line' can make you feel thoroughly irritated as when someone starts to use these words they have a specific meaning in terms of financial data - but how do you find out the meaning and therefore enter into a helpful dialogue with such professionals? The answer is to access educational resources, such as accounting glossaries, some of which are even free. Once you have mastered what these terms mean (and 'above the line' means: '...transactions, assets etc., that are associated with the everyday running of a business') then you can start to really understand how your business is faring - which after all is what really concerns you.
Again if you are unable to grasp what your accountant means when he or she says they want to know your 'landed costs' (which actually means 'The total costs involved when importing goods. They include buying, shipping, insuring and associated taxes') you will probably end up spending more time than necessary in expensive consultations. This means you'll be taking less time to improve your business too. So using an accounting glossary to cut through the jargon can actually save you money as you could spend less time trying to work out what your accountant actually wants and more time giving them the right information. In turn this could also mean your accounting bills are lower.
So what can you do to empower yourself? Seek out an accounting glossary on accounting terms. In short it's all about knowledge. If you make sure that you have a fantastic resource at your finger tips you'll be able to refer to it at any time to uncover the meaning of accounting terms. There is a wealth of information out if you know what you are looking for just waiting for you!
Some people may think that 'gearing' refers to what type of jeans you are wearing this summer! But really it means this: 'Gearing (AKA: leverage): The comparison of a company's long term fixed interest loans compared to its assets. In general two different methods are used: 1. Balance sheet gearing is calculated by dividing long term loans with the equity (or proprietor's net worth). 2. Profit and Loss gearing: Fixed interest payments for the period divided by the profit for the period.'
Similarly, accounting terms such as 'above the line' can make you feel thoroughly irritated as when someone starts to use these words they have a specific meaning in terms of financial data - but how do you find out the meaning and therefore enter into a helpful dialogue with such professionals? The answer is to access educational resources, such as accounting glossaries, some of which are even free. Once you have mastered what these terms mean (and 'above the line' means: '...transactions, assets etc., that are associated with the everyday running of a business') then you can start to really understand how your business is faring - which after all is what really concerns you.
Again if you are unable to grasp what your accountant means when he or she says they want to know your 'landed costs' (which actually means 'The total costs involved when importing goods. They include buying, shipping, insuring and associated taxes') you will probably end up spending more time than necessary in expensive consultations. This means you'll be taking less time to improve your business too. So using an accounting glossary to cut through the jargon can actually save you money as you could spend less time trying to work out what your accountant actually wants and more time giving them the right information. In turn this could also mean your accounting bills are lower.
So what can you do to empower yourself? Seek out an accounting glossary on accounting terms. In short it's all about knowledge. If you make sure that you have a fantastic resource at your finger tips you'll be able to refer to it at any time to uncover the meaning of accounting terms. There is a wealth of information out if you know what you are looking for just waiting for you!
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