Melbourne Bookkeeper Blog
A valid tax invoice for taxable sales that total less than $1,000 must contain:
- the words ‘tax invoice’ stated prominently
- the name of the supplier
- the ABN of the supplier
- the date of issue of the tax invoice
- a brief description of the goods or services sold
- the total price of the sales (including GST).
Creating and maintaining a healthy and safe workplace requires an integrated approach involving government, employers and employees. As with other work practices, OHS is supported and enforced at several levels, being:
- Acts,
- Regulations,
- Codes of practice, and
- Industry standards and guidance notes.
As discussed previously at the end of the general journal tutorial, a business effectively works within several journals depending on the business type. The business type is defined within two distinct categories:
- Primarily cash business, or
- Primarily credit business.
This tutorial focuses on the cash business where a three journal approach is often used, being:
- General Journal,
- Cash Receipts Journal, and
- Cash Payments Journal.
In previous tutorials we learnt about revenue & expense accounts which consist a business's primary goods/services activities. The business profit and loss is measured by calculating the business revenue less business expenses. Whilst one may conclude this is merely adding both in total and subtracting expenses from revenue to define the profit or loss, its not quite that simple in accounting terms. There are many types of revenue and expense within a business structure that facilitate overall profit and loss.
A profit and loss statement can be referred as:
- Income Statement,
- Statement of Financial Performance, and
- Profit and Loss Statement.
So far you have learnt through transaction analysis tables the complexity of each transaction. To understand entirely makes data entry simplistic in nature with less chance of error. Transaction analysis tables are a learning model, they are not an accountancy method. The method to record your daily transactions is through the use of a journal. The journal is the first point of call for all business transactions.
The journal contains information about each transaction as follows:
- Date of transaction,
- Accounts to be posted (including folio),
- Amounts to be posted to each account,
- Whether the account is debited or credited, and
- A description of the entry, detailing source documents and other details necessary.
Read more: The Transaction Journal (Transaction Analysis Evolves)
Building upon the basics learnt in previous tutorials, the realistic business model requires to know whether the business functions at a profit or loss in day-to-day activity. To determine profit or loss you must find the difference between revenue and expenses. Every sale comprises various hidden costs which is what revenue and expense accounts record uniquely.
Revenue Accounts
A revenue account is of a credit nature which derives from the owners equity account, also being of a credit nature. Revenue items generate profit that belong to the owner, therefore; revenue items have the ultimate effect of increasing owners equity so they have a credit nature.
Read more: Determining Profit & Loss - Revenue & Expense Accounts
A chart of accounts is an index of your ledger accounts which assign a folio number to each account for ease of tracking. A chart of accounts is based upon your business type and structure, however; some accounts are standard throughout all business types. Your accountant or bookkeeper can help you determine what accounts you should have for correct accounting of your business as it is not a 'one fits all' scenario.
An example chart of accounts is listed below. The folio numbering could consist any method you desire, as long as its expandable for growth.
The trial balance is periodically used to check the mathematical integrity of the ledger ensuring the double entry rule has taken place. This is not done after every transaction; realistically it is performed on a basis established by the bookkeeper dependant upon the business size and financial transaction complexity. The factor one must remember is that the longer you leave it the harder to find an error if present. With programs such as MYOB or Quicken, this can be performed in a few clicks.
Using our basic example contained in the transaction analysis tutorial, we have the following transactions to post to our basic ledger accounts (columnar format being the more widely used):
For those who run a manual system utilising the T-Account format, the way in which you balance the accounts within your ledger at the end of every month or period is a two part process.
- You must subtract the smaller side from the larger and carry (Balance c/d = Balance Carried Down) the difference on the smaller side, and
- You must then bring down (Balance b/d = Balance Bought Down) the difference in balance to the larger side to commence the next month / period.
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