Junior Assistant (Accounts) key terms

A bookkeeping method in which every transaction is recorded in at least two accounts, with total debits always equalling total credits, so the accounting equation stays balanced.

The two sides of an account. Debits increase assets and expenses, credits increase liabilities, capital and income; each entry needs one of each in equal amount.

The first record of a transaction, showing date, accounts affected, amounts debited and credited, and a short narration explaining the reason for the entry.

The main book of accounts where journal entries are posted account by account, allowing the balance of each asset, liability, income and expense to be seen.

A statement listing all ledger balances at a date to check that total debits equal total credits; it detects arithmetic errors but not errors of principle or omission.

A temporary account used to hold the difference when a trial balance does not agree, later cleared once the underlying bookkeeping error is found and corrected.

A bookkeeping mistake where a transaction is entered in the wrong class of account, such as treating a capital purchase as a revenue expense; it does not disturb trial balance agreement.

A statement that explains the difference between the cash book bank balance and the bank statement balance by listing unpresented cheques, deposits in transit, bank charges and errors.

A book combining the cash account and bank account, recording receipts and payments; a two-column cash book also tracks discounts allowed and received.

A small float of cash kept for minor day-to-day expenses, usually managed by an imprest system where the float is periodically restored to a fixed amount.

A method of controlling petty cash in which a fixed sum is advanced, spent, and then reimbursed by exactly the amount spent, restoring the original float.

A cheque issued and recorded in the cash book but not yet presented to and cleared by the bank, so it appears as a timing difference in reconciliation.

A written order directing a bank to pay a stated sum from the drawer's account to a named payee or bearer; it may be crossed for deposit only.

The accounting rule that income and expenses are recognised in the period they are earned or incurred, regardless of when cash is received or paid.

The idea that expenses should be recorded in the same period as the income they helped generate, so reported profit reflects the true effort and reward of the period.

An amount paid in advance for goods or services not yet consumed, such as insurance for next year; it is an asset until the benefit is used.

A cost incurred during the period but not yet paid, such as unpaid wages or electricity; it is a liability and is charged to the current period's profit.

The systematic allocation of the cost of a fixed asset over its useful life, reflecting wear, tear and obsolescence rather than a fall in market value.

Spending on acquiring or improving a long-term asset, such as machinery or a building, which is shown on the balance sheet rather than charged to profit.

Spending on day-to-day running costs or repairs that benefit only the current period, so it is charged as an expense in the income statement.

A statement of assets, liabilities and capital at a particular date, showing what the business owns, owes and the owners' stake in it.

Assets expected to be converted into cash or used up within one year, such as cash, debtors, stock and short-term investments.

The excess of current assets over current liabilities, measuring the short-term funds available to run daily operations smoothly.

Current assets divided by current liabilities; a liquidity measure showing whether short-term obligations can be met from short-term resources.

The technique of comparing figures in financial statements as ratios, such as profitability, liquidity and efficiency ratios, to judge performance and financial health.

The level of sales at which total revenue equals total cost, so there is neither profit nor loss; it equals fixed costs divided by contribution per unit.

Sales revenue minus variable costs; it first covers fixed costs and any remainder becomes profit, making it central to cost-volume-profit decisions.

The amount by which actual or budgeted sales exceed the break-even sales, indicating how far sales can fall before a loss arises.

Comparing actual costs and revenues with standard or budgeted figures, then identifying whether differences are favourable or adverse and why they arose.

Setting predetermined costs for materials, labour and overheads for a product, then comparing actual costs against them to control spending and value stock.

The policies and procedures a business uses to safeguard assets, ensure accurate records and prevent fraud, including segregation of duties and authorisation limits.

Splitting tasks so no single person controls a whole transaction from start to finish, for example keeping cash handling separate from record keeping.

The documented path that lets an auditor trace a transaction from source document to ledger and financial statements, and back again.

A supporting document, such as a bill, receipt or payment authorisation, that evidences a transaction and justifies the accounting entry made.

Under a goods and services tax system, the tax paid on purchases that a registered business may set off against the tax payable on its sales.

A broad-based indirect tax levied on the supply of goods and services, collected at each stage of the chain with credit for tax already paid on inputs.

A mechanism where the payer withholds a portion of certain payments, such as salary or contract fees, and deposits it with the tax authority on the recipient's behalf.

Income tax paid in instalments during the year before the final return is filed, based on estimated annual income, to avoid a lump sum at year end.

An indirect tax charged on the value added at each stage of production and distribution, with businesses recovering tax paid on their purchases.

Accounting software widely used for recording vouchers, maintaining ledgers and generating reports such as trial balance, profit and loss account and balance sheet.