Basic Bookkeeping Terms You Need to Know (Part III)
01. Income Statement
This is another name for the previously mentioned profit and loss statement. It details all the money going in and out of your business to show you how much you have profited and where you have incurred financial losses. You should have your income statement alongside your balance sheet to have two sets of information on all your income and expenditure.
Journals are your accounts and the way that you record all your transactions. You can enter costs, dates, sales, and expenditures into a journal to track how your accounts have been affected each month. By having space in the journal for individual transactions you'll be able to spot anything wrongly recorded much more easily.
A liability is anything that your business is legally responsible for and that you are required to pay out to cover. Any loans or debts that you incur are liabilities that become expenses when you pay them, and you should track these payments with your accounts payable.
05. Single-Entry Bookkeeping
This is a similar method of record to double-entry booking, but it only requires you to make one entry for each business transaction. And you only need to use one accounting system: a cash register. You should use single-entry bookkeeping when only one account will be affected by a transaction, such as just your income.
06. Trial Balance
This is part of the double-entry bookkeeping process. It is how you'll know if your double-entry records are accurate because you'll be able to see if your debit and credit accounts match or clash. If there are discrepancies due to incorrectly recorded information, you should go back through your accounts and work out where you went wrong.
You'll only really need the worksheet if you are having the aforementioned issues with your trial balance. It is easiest to create a worksheet as a spreadsheet so that you can input all the necessary data, accounts, and costs. These are then used to track every detail you log and any changes you make to the records.
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