The Ultimate Guide to Accounting Jargon For Business Owners (Part 1)Jun 08, 2022
Hi business owners!
Today is a special blog post because I’m going to play the role of your translator. Whenever you see Korean or Japanese actors on TV for an interview in English, they usually have a translator by their side. So let me play the role of your translator and translate accounting jargon into simple English that’s easy for you to understand.
Here are some popular accounting jargon that every business owners should know.
Trade is your usual business activity which is the sales and purchases of your products or services.
For example, if you have an online business, selling online courses, membership accesses and consultation sessions will be considered as your usual business activity while selling your used laptop (fixed asset) is not your usual business activity. If you have an e-commerce business, selling your products on Etsy will be considered as your usual business activity while selling your used sewing machine (fixed asset) is not your usual business activity.
The term Trade is commonly used as Trade Receivables and Trade Payables.
2. AR, Accounts Receivable, Trade Receivables, Receivables
Accounts Receivable is also known as Trade Receivables, Receivables or AR (the abbreviation of Accounts Receivable). Accounts Receivable are the money that you will receive from your customers for the sales of your products or services.
Here’s an easy way to remember Accounts Receivable. Accounts Receivable refer to the money that your business will “receive”. That is why it is called “Receivable”.
But there’s a catch to this. Only money from the sales of your products or services will be considered as Accounts Receivable. Which means, only the customers that owe you money will be considered as Accounts Receivable.
If your business will receive money from you, your business partner or any other party for other purposes, the money will not be considered as Accounts Receivable.
3. AP, Accounts Payable, Trade Payables, Payables
Accounts Payable is also known as Trade Payables, Payables or AP (the abbreviation of Accounts Payable). Accounts Payable are the money that you will pay to your suppliers, service providers or contractors for the purchases of your products or services that you will sell to customers.
Does this sounds familiar to you? This is the opposite of Accounts Receivable. Accounts Payable refer to the money that your business will “pay”. That is why it is called “Payable”. The catch to this is only money from the purchases of your products or services that you will sell to customers will be considered as Accounts Payable. Which means, only the suppliers, service providers or contractors that you owe them money will be considered as Accounts Payable.
If your business will pay money to you, your business partner or any other party for other purposes, the money will not be considered as Accounts Payable.
4. JV, Journal Voucher, Journal, Manual Journal
Journal Voucher is also known as Journal, Manual Journal or simply JV (the abbreviation of Journal Voucher). A journal is an accounting transaction that you manually record into your accounting system where you have full control of the accounts to debit and credit and the amount of the transaction.
There are a few system controlled accounts which are not allowed to be used in a journal such as Accounts Receivable, Accounts Payable, bank accounts and inventories account. There are designated pages for these accounts such as customer invoice page so that your accounting system could calculates the balances of these accounts correctly.
You may need to prepare a journal voucher if it is a requirement from your local government. A journal voucher is a physical piece of paper which contains all the information of your journal along with signatures of approver and the person who records the journal in your accounting system.
5. PV, Payment Voucher, Pymt Voucher
Commonly referred to as PV which is the abbreviation of Payment Voucher. It is a physical piece of paper (or a digital version) which contains all the information of your payment along with signatures of approver, the person who records the payment in your accounting system and the person who receives the money if it is a cash payment.
6. Closing, Monthly Closing, Quarterly Closing, Annual Closing
Closing may be referred to as Monthly Closing, Quarterly Closing and Annual Closing. When someone says he or she is “doing monthly closing”, it means he or she is doing all the bookkeeping tasks to complete the accounts for the month.
So can you guess what does Quarterly Closing means? That’s right! It’s completing your accounts for the quarter. The same goes for annual or yearly closing.
Accounting jargon are pretty easy to understand, right?
Now let’s recap! The accounting jargon that you have learned today is trade, Accounts Receivable, Accounts Payable, Journal, Payment Voucher and Closing. In the next blog post (part 2), you'll learn another 6 accounting jargon that you need to know as a business owner.
If you join our free course, Master User Academy Level 1 course, you’ll receive an email when part 2 is available. It’s free, so join now! Just fill up the form at the end of this page.
The next time these accounting jargon pops up, you will understand it immediately. However, if you forgot what it means, don’t worry! You can bookmark this page so you can easily come back to get it translated for you. So which accounting jargon did you find easy to remember?
Drop me an email or message us on Instagram, Facebook or YouTube and let me know!
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