Glossary of terms
The ABN is a unique 11-digit number that identifies your business or organisation to the government and community. Register for an ABN via https://register.business.gov.au/
A person whose job is to keep, inspect, and analyse financial accounts.
The specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.
Accounting software manages and records the day-to-day financial transactions of an organisation, including fixed asset management, expense management, revenue management, accounts receivable, accounts payable, subledger accounting, and reporting and analytics. A complete accounting system keeps track of an organisation’s assets, liabilities, revenues, and expenses. These transactions then populate the general ledger in real time, providing CFOs, treasurers, and controllers immediate access to real time, accurate financial data.
Refers to the bills you need to pay. Payables or AP. It may also refer to the person who processes invoices or pays bills.
Refers to what you’re owed by customers. Any invoice that has been sent becomes part of your accounts receivable until it has been paid. The name is given to the money that is owed and the process of collecting it.
Account to Account Transfer - Also known as A2A transfer, allows you to move money directly from a payer's bank account to a payee's bank account without the need for intermediaries, such as credit or debit cards.
The effects of transactions and other events are recognised when they occur (and not as cash or its equivalent is received or paid) and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate.
The systematic allocation of the depreciable amount of an intangible asset over its useful life.
The financial year or similar period to which annual financial statements relate.
A resource: a) controlled by an entity as a result of past events; and b) from which future economic benefits are expected to flow to the entity.
A review of a company's financial records and processes by an independent third party to ensure accuracy and compliance with accounting standards and regulations.
A financial statement that contains details of a company's assets or liabilities at a specific point in time. It is one of the three core financial statements (income statement and cash flow statement being the other two) used for evaluating the performance of a business.
The process of matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement.
Book value is the accounting value of the company's assets less all claims senior to common equity (such as the company's liabilities).
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Commerce between two businesses or companies
Commerce between a business and a customer or end user
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Cash on hand and demand deposits.
An accounting method that records revenues and expenses when cash is received or paid, regardless of when they are earned or incurred.
Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
The amount of cash or cash-equivalent which the company receives or gives out by the way of payment(s) to creditors is known as cash flow. Cash flow analysis is often used to analyse the liquidity position of the company.
The financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity.
A possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
Is: a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or b) a present obligation that arises from past events but is not recognised because: it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or ii. the amount of the obligation cannot be measured with sufficient reliability.
The capacity of an entity to dominate decision-making, directly or indirectly, in relation to the financial and operating policies of another entity so as to enable that other entity to operate with it in achieving the objectives of the controlling entity.
The cost of sales is the accumulated total of all costs used to create a product or service, which has been sold.
The Australian Government created two new income support payments to assist individuals affected by state and territory government decisions relating to COVID-19: More information can be found at: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp2122/Quick_Guides/COVID-19DisasterPayments.
A score to show how likely you are to be accepted for borrowing/credit. This is based on credit history: number of open accounts, total levels of debt, repayment history, and other factors.
A document a credit reporting body produces using your information supplied by credit providers and other sources. Includes information about your credit activity and current credit situation such as loan paying history.
An entity shall classify an asset as current when: a) It expects to realise the asset, or intends to sell or consume it, in its normal operating cycle; b) It holds the asset primarily for the purpose of trading; c) It expects to realise the asset within twelve months after the reporting period; or d) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
An entity shall classify a liability as current when: a) It expects to settle the liability in its normal operating cycle; b) It holds the liability primarily for the purpose of trading; c) The liability is due to be settled within twelve months after the reporting period; or d) The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. An entity shall classify all other liabilities as non-current.
The systematic allocation of the depreciable amount of an asset over its useful life.
The expenses a business incurs to make a product or deliver a service, or when it buys a wholesale product for resale.
All forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment. Equity The residual interest in the assets of the entity after deducting all its liabilities.
The residual interest in the assets of a company after deducting liabilities.
End of financial year or fiscal year is a 12-month accounting period that a business uses for financial and tax reporting purposes. A fiscal year is also known as a financial year.
Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Activities that result in changes in the size and composition of the contributed equity and borrowings of the entity. Impairment loss. The amount by which the carrying amount of an asset exceeds its recoverable amount. Income Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.
Strategic planning, organising, directing, and controlling of financial undertakings in an organisation or an institute. It also includes applying management principles to the financial assets of an organisation, while also playing an important part in fiscal management.
The difference between revenue and the cost of goods sold, which represents the profit earned from the sale of goods or services before deducting operating expenses.
Goods and services tax (GST) is a tax of 10% on most goods, services and other items sold or consumed in Australia. If your business is registered for GST, you have to collect this extra money (one-eleventh of the sale price) from your customers. You pay this to the Australian Taxation Office (ATO) when it's due.
An online tool to help you calculate goods and services tax (usually 10%)
A financial statement that shows a company's revenue and expenses, and the resulting net income or loss, over a specific period of time.
general business and administration expenses that aren’t directly linked to making products or delivering services. They’re the opposite of direct costs.
An identifiable non-monetary asset without physical substance.
The acquisition and disposal of long-term assets and other investments not included in cash equivalents.
A document that maintains a record of a transaction between a buyer and seller.
A document layout that makes it simple to create, edit, and customise your invoices.
Those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.
A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
The availability of cash in the near future after taking account of financial commitments over this period.
The difference between revenue and expenses, which represents the profit or loss of a company or individual.
An asset that does not meet the definition of a current asset. Non-current liability A liability that does not meet the definition of a current liability. FS 024 Glossary of Accounting Terms Updated 3 December 2019.
The principal revenue-producing activities of an entity and other activities that are not investing or financing activities.
Money owed by the entity to its suppliers shown as a liability in the Statement of Financial Position.
A tool to help users understand their salary information
The total of income less expenses, excluding the components of other comprehensive income.
items that: a) Are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and b) Are expected to be used during more than one period.
A liability of uncertain timing or amount.
A legally enforceable claim for payment held by an entity for goods supplied and/or services rendered that customers/clients have ordered but not paid for. Shown as an asset in the Statement of Financial Position.
A transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.
The gross inflow of economic benefits during the period arising in the course of ordinary activities of an entity when those inflows result in increases in equity, other than increases in equity, other than increases relating to contributions from equity participants.
A person who is the exclusive owner of a business, entitled to keep all profits after tax has been paid but liable for all losses.
An entity that is controlled by another entity. FS 024 Glossary of Accounting Terms Updated 3 December 2019 .
A tool to help a user understand how much tax they’ll need to pay on their income
A business expense that can lower the amount of tax you have to pay. It's deducted from your gross income to arrive at your taxable income.
An online tool to help you calculate your tax refund https://www.ato.gov.au/calculators-and-tools/income-tax-estimator/.
Either: a) The period over which an asset is expected to be available for use by an entity; or b) The number of production or similar units expected to be obtained from the asset by the entity.
The capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities.
Your username and password that is used to log into your Xero account
This glossary uses extracts from Australian Accounting Standards:
© Commonwealth of Australia 2019 This fact sheet is not intended to be comprehensive. It is designed to assist in gaining an understanding of the financial statements that registered organisations are required to prepare and lodge with the Registered Organisations Commission. The Registered Organisations Commission does not provide legal advice.