Even if us Budding IT professionals think “eh, we’ll be locked away in a office tinkering with VM’s and fixing stuff, why do i need to know all this finance and business mumbo jumbo”
The reality is more along the lines that we will often be communicating with people who aren’t into IT, but managing finances and whatnot is a major part of their job, so in turn we need to know at least the basics of what they work with.
Below are some terms that are often used by accountants and the like
- Cheque Butt.
- Credit Note
- External Source Document
- Internal Source Document
- Purchase Order
- Remittance Advice
- Source Document
- Tax Invoice
An invoice which meets the extra requirements when a business is registered for GST
Details what the customer has purchased including date, description and quantity
Generated outside the business or created by the business to send out
Generated within the business and retained within the business
May be prepared when money is received by the business
Provides the evidence that a transaction has actually taken place
Purchaser issues this to a supplier listing what goods they want to order
Shows details about a cheque written including date, person or business being paid, reason for payment and amount
Shows details of who is making a payment and what they are making the payment for
Summary of invoices and credit notes issued to the customer and payments received from the customer
Used when a customer has returned goods purchased or been overcharged on their original purchase
Here are some Terms and their meanings.
Accounts Payable, Money owed by a company to its creditors
Accounts Receivable, Money owned to a company by its debtors
Assets, also known as stock
Bad Debt, Uncollectable debt that is written off.
GST, Goods and Services tax. a flat tax of 15% on most things.
Inventory, Raw materials work in progress and goods held for resale by the buisness
Mark up, the amount added to goods or services to make it profitable for the company
Net Profit, The diffrence between income and expences of a buisness
Partnership, Two or more people who own/run a business. Sharing profit, tax and liability
Shareholder, somebody who buys and trades a part of the business listed on a stock exchange like the NASDAQ
Sole Trader, One person owns the buisness. keeps the profit for themselves but is also liable for tax, risks and debt.
Businesses often have and run procedures to safegaurd assets and cash, to help keep accounting accurate and prevent people from paying the wrong amounts. over time this could cause major tax issues that could get the company into serious trouble, examples like:
Matching Purchases and Requisition orders to purchase orders.
Matching Purchase order to delivery docket
Matching delivery docket to packing slip to invoice
and so on and so forth.
Gap Fill exercise
Business A prepares a purchase order which it sends to Business B.
Business B receives the purchase order from Business A, locates the goods and packages them up to send to Business B. Business B also prepares an invoice which they may use as a packing slip as well. The invoice could be sent with the goods or sent at a later date to Business A.
When Business A receives the invoice and goods they will compare what has been sent is what they ordered by comparing them to the purchase order copy they kept.
When Business A confirms they have received what they ordered, they will pay the invoice using a cheque or paying online. They may also send back a remittance advice so business B knows who the payment comes from.
When business B receives the payment from Business A they may issue a receipt.
Business B will bank any cheques/payments they have received into their bank account.
If Business A has not paid by the end of the month, Business B may send a statement which shows the amount still owing by Business A.
Sometimes Business B may issue a credit note if the items sent to Business A are damaged or missing to reduce the amount Business A owes to Business B.
There are multiple forms of tax a business needs to manage and pay, often having entire parts of the company dedicated just to handling it, governments are not a fan of being shorted on tax. It’s always the story that Al Capone got done on tax fraud after they couldn’t stick anything else on him.
Some examples are,
Income tax, something everybody pays out of their income to fund goverment projects like roads and services.
Student loans are automatically removed from income to pay them.
GST as i covered above is charged on most things.
Company finances and Business speak is a complex and deep field, and a little over my head a times. there’s good reason i’m not an accountant.