TERMINOLOGY AND OUR CLIENTS
Every industry evolves its own language and terminology to explain the technical information or concepts. Unfortunately, every industry also falls into the trap of assuming everyone they speak to understands their jargon.
This particularly true of the accounting industry, far too often we hear complaints from clients that we talk “shop” and use the language that they don’t understand. Accounting and tax is a complicated enough area and sometimes we forget that our clients do not understand the terms we use in our day-to-day work and take for granted.
As Accountants, we are aware that most of our clients do not understand our lingo. Our clients come from different educations and working backgrounds and many of the terms accountants use. Dividends, CGT, FBT, capitalising, rebates etc are just a few of the terms we take for granted in our business.
At Macarthur’s we realise that good client service does not just mean getting the job done on time, but also helping our clients understand.
The most important thing we have realised is that clients will not tell us that they do not understand our advice – they will simply leave rather than stupid in front of us.
At Macarthur’s, we have decided that it is important to educate our clients and we have created a set of terms which have become part of our culture. We regularly hold team-training sessions to remind our team of these terms and reinforce the importance of avoiding jargon when talking to clients. Improving the interpersonal skills of our team has had enormous benefits for our clients.
Common Accounting Terms
Asset- An asset is something that you own. For example cash in the bank, Plant and equipment or motor vehicles
Balance Sheet- A balance sheet is the window to your business and it summaries your assets and liabilities
Bank Reconciliation- Bank reconciliation is what we do to balance the bank account
Capital Gains Tax or CGT- The Tax you pay on the profit of an asset or investment
Capitalise- If you capitalise an expense, you can write it off over a number of years. You cannot write this expense off this year.
Credit Loan Account- A credit loan account is the record of money that the company owes you.
Creditors- Creditors refer to others that you owe money
Debit Loan Account- A debit loan account is the record of money that you owe the company.
Debtors- Debtors refer to others who owe you money
Depreciation- Depreciation means the claiming cost of an item over a number of years rather than claiming the whole amount up front
Fringe Benefits Tax or FBT- FBT is a tax on a benefit that you receive from your company that is of a private nature
Gross Profit Margin- Gross profit margin is calculated by adding the purchases and direct costs of sales and then calculating the profit. Dividing the profit figure by the sales figure equals the gross profit margin. Gross profit is your profit as a percentage of sales. It is NOT the same as Mark Up.
Journal- An Accounting entry that we do to adjust your financial accounts.
Liability- A liability is something that you owe to someone. For example: a bank loan or lease.
Mark up- Mark up refers to your profit as a percentage of costs. Its is not the same as gross profit margin.
Negative Gearing- Negative gearing works
the same way as running a business. When the expenses, including interest, are more than the income (rent), you can deduct this loss against other income you earn
Profit and Loss Account- Profit and loss is the amount calculated by taking all your expenses to run the business away from your sales income. If the remaining amount is positive, you have made a profit, it is negative, a loss.
Rebate/ Offset- A rebate or Offset is a reduction of tax.
Shareholder’s Equity- The business’s net worth is owned by you and other shareholders.
Tax Deduction – Individual- A tax deduction is a deductible expense that can reduce taxable income. Once all deductions have been made, tax is calculated at the appropriate marginal tax rate for the individual.
Work in Progress- work in progress refers to work that is underway, but has not been finished at the end of the month. This work is carried forward to the next period to be claimed when you actually raise the invoice for that job.