Key accounting terms every entrepreneur should know Part One
EPISODE 37
Notes
Today’s episode is all about key accounting terms that every entrepreneur needs to know. Some terms you might already know, others you may kind of know, but there are nuances that are helpful to understand, and others you might have avoided knowing like the plague! Understanding these terms means you no longer need to be scared of them.
I’m dedicating two episodes to this topic, so you don’t get too overwhelmed by all the accounting and number terms at once.
I break down a profit and loss statement and the common terms you see on it. I define and explain the nuances between sales, revenue, and income, as well as how Xero uses these terms. I also explain how you can split out operating income and non-operating income, and I run through how this is done and why this is helpful. I also define expenses and all the different types - direct costs and indirect costs, and the further ways these can be split to better understand your business performance.
I also explain a common mistake made with costs, which can affect understanding how profitable your business appears. Finally, I run through gross profit, net profit and gross margin (a really important figure metric, especially in a goods business).
Understanding these terms will superpower your business acumen - if you know how you are doing in business, you can take the right next steps.
Next episode (Part 2), I’m going to cover the balance sheet terms that are important for you to know, as well as explain what depreciation and EBITDA are. You’ll be a whiz at monitoring your business’s financial performance in no time!
About the
Author
Bec is a chartered accountant who worked at Australia’s big firms and banks for 15-years. Faced at a crossroads in her career, she backed herself, left her corporate job and launched Straight Up Bookkeeping. 3 years and 5 staff later, Straight Up Bookkeeping is one of Australia’s leading virtual bookkeeping businesses for creatives, with a mission to free business owners from financial stress so they can grow their empires.
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