Glossary
ABN: Australian business number.
abnormal expenses: Expenses that aren’t part of your everyday business, such as lawsuit expenses, capital losses or entertaining aliens from outer space.
abnormal income: Any income that’s not really part of your everyday business, such as interest income, one-off capital gains or gifts from mysterious great-aunties.
absorption costing: The process of costing an item where you factor in not just the cost of raw materials, but also freight and the cost of labour, plus an allowance for factory overheads, such as electricity, insurance and rent.
account: A classification that enables you to group similar transactions together.
account classification: There are six account classifications: Assets, liabilities, equity, income, cost of sales and expenses.
accounting equation: Assets = liabilities + equity (the essential equation behind all bookkeeping activities).
accounts list: See chart of accounts.
accounts payable: Money that you owe to suppliers.
accounts receivable: Money that customers owe you.
accounts receivable ratio: A quick measure of the success of your debt collection activities.
accrual: An adjustment for expenses that you haven’t received a bill for yet, but that the business has incurred, or an adjustment for income that you’ve earned, but you haven’t billed for yet.
accrual accounting: A system of accounting where you recognise income at the time the sale occurs, regardless of when you receive cash from a customer, and you ...
