Loki waiting for me to stop working and take her for a walk!

Terms of Reference:

The language of the banking, taxation and economy can be confusing or just plain strange to the uninitiated.

v Assets – what you own

v Liability – what you owe

v Income – what you are earning

v Expense – what is it costing you to earn the income

v Equity – earnings after expense plus what you have put into or taken away from the business

v Debit –(always left column of the ledger sheet) a transaction against a ledger :

Ø Assets including Bank – you are putting money in

Ø Liability– you are increasing what you owe

Ø Income – you are losing income

Ø Expense – you are gaining a usable supply

Ø Equity – you are taking out of your pocket and putting it into your business

v Credit –(always right column of the ledger sheet) a transaction against a ledger:

Ø Assets including Bank – you are taking money out

Ø Liability – you are decreasing your debts

Ø Income – you are making money

Ø Expenses – you are reducing you costs.

Ø Equity – you are putting money in your pocket and taking it from you business

v Accounts – a place to allocate any of the above

v Ledger – the data sheet of the accounts

v Bank Statement – a ledger data sheet of the transaction per account that you own in the bank

v Credit Card Statement – a ledger data sheet of the transactions per account that owe to the company

v Income statement – a report of the accounts of income and expenses

v Balance Sheet – a report of the accounts of assets, liabilities, and equity

v Invoice – the document you present to a client for payment of services or goods and what you receive from a contractor or supplier for services or goods

v Receipt – a document that shows payment of goods or services – can be the same as an invoice but should not be considered to be an invoice when there is only the confirmation of payment transaction.

v Capital Cost – a item that is purchased by you or your business that has a long term use

v Depreciation – a deemed cost based on a prorated value of use per year for Capital Costs

v Proration – the relation of a given amount to 100.00 – a duel valuation of the expense based on time, usage or similar cost allocation.

v Legislation – an act or statute of government to implement rules of conduct, process and taxation

Date – this is a little understated as it is only the Date. However the date of the transaction is a determining value in the processing of all of the above. For this purpose I will use the date system of month/day/year. Be forewarned that there is no legislation in the implementation of the date in the receipt or invoice. So have fun with this – no amount of patience can unravel the date of 07/03/09 on the lone receipt that resurfaces after a year or more of collecting dust at the bottom of the cupboard! And yes, the size of the receipt is not necessarily the issue; big ones do this as well as the small receipts (size and value). It is a part of humanity that we really need to accept – we lose things and they sometimes come back. If we are organized and aware of this – we can spot the whole in the accounts that this missing invoice.