Term
| What is the difference between bookkeeping & accounting |
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Definition
| In summary, bookkeeping is the process of recording and organizing financial data, while accounting involves analyzing that data to make informed business decisions. Both are essential components of effective financial management. |
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Term
| What are 2 of the key differences between bookkeeping and accounting? |
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Definition
Skills: Bookkeeping requires a high level of accuracy and attention to detail, as well as knowledge of accounting principles and software. Accounting, on the other hand, requires a deeper understanding of financial analysis, budgeting, and forecasting.
Outputs: The outputs of bookkeeping include financial statements, such as balance sheets and income statements, while accounting involves using those statements to make business decisions and forecasts. |
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Term
| What are 2 of the key differences between bookkeeping and accounting? |
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Definition
Scope: Bookkeeping is primarily concerned with recording and organizing financial transactions, while accounting is a broader field that includes analyzing financial data to make business decisions.
Timing: Bookkeeping is an ongoing process that involves recording transactions as they occur, while accounting typically involves analyzing financial |
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Term
| What are the functions of bookkeeping |
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Definition
| The primary functions of bookkeeping are to record, classify, and organize financial transactions, create and maintain financial records, prepare financial statements, and monitor financial performance." |
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Term
| What are the functions of accounting |
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Definition
| The primary functions of accounting are to interpret, analyze, and report financial data, provide financial advice to management, and make informed business decisions based on financial information. |
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Term
| What is an income statement? |
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Definition
| An income statement, also known as a profit and loss statement, is a financial statement that summarizes a company's revenues, expenses, gains, and losses over a specific period of time, typically a month or a year. It shows whether the company generated a profit or a loss during the period, and provides insights into the company's financial performance |
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Term
| How to calculate an income statement |
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Definition
Revenue - Cost of Goods Sold (COGS) = Gross Profit - Operating Expenses = Operating Income + Non-Operating Income -
Non-Operating Expenses = Profit Before
Taxes - Taxes = Net Profit or Net Income |
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Term
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Definition
| Accounts payable is a liability account that tracks the amounts owed by a company to its creditors or suppliers for goods and services purchased on credit. It represents the unpaid bills and invoices that a company has received and is obligated to pay in the future |
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Term
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Definition
| Accounts receivable is an asset account that tracks the amounts owed to a company by its customers for goods or services sold on credit. It represents the unpaid invoices and bills that the company has issued and is awaiting payment from its customers. |
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Term
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Definition
| Non-current assets are long-term assets that are expected to be used by a company for more than one accounting period, typically longer than a year. Examples of non-current assets include property, plant and equipment, intangible assets, and long-term investments |
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Term
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Definition
| urrent assets are short-term assets that are expected to be converted into cash within one accounting period, typically within a year. Examples of current assets include cash and cash equivalents, accounts receivable, inventory, and short-term investments. |
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Term
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Definition
| Revenue or sales have a credit balance because they are part of the income or earnings of a company. In accounting, revenue is recognized when it is earned, regardless of when the cash is received. When a company makes a sale or provides a service, it creates a credit entry in the revenue or sales account, which increases the balance of the account |
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Term
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Definition
| his credit entry is balanced by a debit entry in another account, such as accounts receivable or cash, which reflects the amount of money owed to the company or received from the customer. |
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Term
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Definition
| To have an item on account means that a transaction has been made, but payment for that transaction has not been received immediately. In other words, it refers to a situation where a customer has received goods or services from a supplier but has not paid for them in cash or with an immediate payment method such as a credit card. |
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Term
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Definition
Credit your revenue, Debit your cash
Debit goes to the left, credit goes to the right
Credit side calculates the amount |
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Term
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Definition
| If the credit balance is less than the debit side, minus the totals and the end figure, would be the balance carried down |
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Term
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Definition
| The Debit Balance would be brought forward to the next period |
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Term
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Definition
| financial records are documents that provide information about a company's financial transactions and activities. |
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Term
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Definition
| Assets are economic resources that are owned or controlled by a company and are expected to provide future financial benefits. They can include physical items such as property, equipment, and inventory, as well as intangible items such as patents, trademarks, and goodwill |
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Term
| general steps for writing up a journal entry |
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Definition
| Determine the accounts to be debited and credited: Identify the accounts that are affected by the transaction and determine which accounts will be debited (increase in assets, expenses, or dividends) and which accounts will be credited (increase in liabilities, equity, or revenue). |
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Term
| general steps for writing up a journal entry |
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Definition
Determine the amounts: Determine the amounts to be debited and credited for each account based on the transaction.
Record the date: Record the date of the transaction at the top of the journal entry. |
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Term
| general steps for writing up a journal entry |
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Definition
| Record the accounts and amounts: Record the accounts to be debited and credited, along with their respective amounts, on separate lines. Indicate the debit amounts with the abbreviation "Dr." and the credit amounts with the abbreviation "Cr." |
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Term
| general steps for writing up a journal entry |
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Definition
Record a brief explanation: Write a brief explanation of the transaction in the memo line below the account entries.
Calculate the totals: Calculate the total debits and total credits and ensure they are equal.
Post the journal entry: Transfer the journal entry to the appropriate ledger accounts. |
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Term
| general steps for writing up a general ledger: |
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Definition
Determine the accounts to be included: Identify the accounts that need to be included in the ledger based on the chart of accounts.
Set up the ledger sheets: Set up a separate ledger sheet for each account. Include the account name and account number at the top of each sheet. |
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Term
| general steps for writing up a general ledger: |
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Definition
| Record the opening balance: Record the opening balance for each account in the appropriate ledger sheet. If the account has no previous balance, write "0" in the opening balance column. |
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Term
| general steps for writing up a general ledger: |
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Definition
| Record transactions: Record each transaction that affects the account in the appropriate ledger sheet, using the date and a brief explanation of the transaction. Indicate the debit amounts with the abbreviation "Dr." and the credit amounts with the abbreviation "Cr." |
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Term
| general steps for writing up a general ledger: |
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Definition
| Calculate the running balance: Calculate the running balance for each account by adding or subtracting each transaction amount from the opening balance. The running balance should be updated after each transaction. |
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Term
| general steps for writing up a general ledger: |
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Definition
| Prepare a trial balance: Once all transactions have been recorded, prepare a trial balance by listing all the account balances from the ledger. Total the debit and credit columns and ensure they are equal. |
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Term
| general steps for writing up a general ledger: |
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Definition
| Use the general ledger: The general ledger can be used to create financial statements such as the income statement and balance sheet. It can also be used to analyze business performance and make financial decisions. |
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Term
| What is Working Capital Management? |
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Definition
| Working capital management is a business strategy designed to ensure that a company operates efficiently by monitoring and using its current assets and liabilities to their most effective use. The efficiency of working capital management can be quantified using ratio analysis. The goal is to maintain sufficient cash flow to meet its short-term operating costs and short-term debt obligations and maximize profitability. |
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Term
| Components of Working Capital Management? |
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Definition
| Current assets include anything that can be easily converted into cash within 12 months. These are the company's highly liquid assets. Some current assets include cash, bank, accounts receivable, inventory, and short-term investments. Current liabilities are any obligations due within the following 12 months. These include accruals for operating expenses, accounts payables, and current portions of long-term debt payments. |
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Term
| Components of Working Capital Management |
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Definition
Cash Bank Accounts Receivables Inventory
Short-term investments Prepayments Bank overdraft Accruals Accounts Payables
Current portion of Long-term liabilities |
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Term
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Definition
| Inventory is the raw materials used to produce goods as well as the goods that are available for sale. It is classified as a current asset on a company's balance sheet. The three types of inventory include raw materials, work-in-progress, and finished goods. |
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Term
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Definition
| Accruals are expenses incurred that impact a company’s income statement, although cash related to the transaction has not yet changed hands. Accruals also affect the balance sheet, as they involve non-cash assets and liabilities. |
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Term
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Definition
| A bank overdraft makes it possible to overdraw a current account. This means that if an outgoing payment is higher than the money still available in the account, the payment can still be made thanks to the bank overdraft, even if the account does not have sufficient funds. |
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Term
| Current portion of Long-term Liabilities |
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Definition
| The current portion of long-term debt (CPLTD) is the amount of unpaid principal from long-term debt that has accrued in a company's normal operating cycle (typically less than 12 months). It is considered a current liability because it has to be paid within that period. |
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Term
| The Working Capital/Current ratio |
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Definition
| Current Assets / Current Liabilities |
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Term
| The Quick/Acid Test ratio |
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Definition
| (Current Assets - Inventory) / Current Liabilities |
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Term
| The inventory turnover ratio |
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Definition
| Cost of Goods Sold / Average Inventory |
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Term
| The Account Receivables Turnover |
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Definition
| Net Credit Sales / Average Accounts Receivable |
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Term
| Number of Days in Receivables |
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Definition
| 365 / Accounts Receivable Turnover Ratio |
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Term
| Accounts Payable Turnover Ratio |
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Definition
| Total Purchases / Average Accounts Payable |
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Term
| Number of Days in Payables |
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Definition
| 365 / Accounts Payable Turnover Ratio |
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Term
| WHAT IS A BANK RECONCILIATION |
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Definition
| A bank reconciliation is a process of matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement. The goal of this process is to ascertain the differences between the two, and to book changes to the accounting records as appropriate. The information on the bank statement is the bank's record of all transactions impacting the entity's bank account during the past month. |
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Term
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Definition
| Cash and/or checks that have been received and recorded by an entity, but which have not yet been recorded in the records of the bank where the entity deposits the funds. If this occurs at month-end, the deposit will not appear in the bank statement, and so becomes a reconciling item in the bank reconciliation. A deposit in transit occurs when a deposit arrives at the bank too late for it to be recorded that day, or if the entity mails the deposit to the bank |
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Term
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Definition
| A check payment that has been recorded by the issuing entity, but which has not yet cleared its bank account as a deduction from cash. If it has not yet cleared the bank by the end of the month, it does not appear on the month-end bank statement, and so is a reconciling item in the month-end bank reconciliation. |
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Term
| Not Sufficient Fund (NSF)/Bounced check |
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Definition
| A check that was not honoured by the bank of the entity issuing the check, on the grounds that the entity's bank account does not contain sufficient funds. NSF is an acronym for "not sufficient funds." The entity attempting to cash an NSF check may be charged a processing fee by its bank. The entity issuing an NSF check will certainly be charged a fee by its bank. |
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Term
| several steps involved in performing a bank reconciliation: |
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Definition
Start with the ending balance on the bank statement.
Add any deposits in transit that have not yet been recorded in the company's accounting records. |
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Term
| several steps involved in performing a bank reconciliation: |
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Definition
Subtract any outstanding checks that have been recorded in the accounting records but have not yet cleared the bank.
Add or subtract any bank errors or adjustments, such as service charges or interest income. |
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Term
| several steps involved in performing a bank reconciliation: |
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Definition
| Compare the adjusted bank balance with the balance in the company's accounting records. If they match, the reconciliation is complete. If they do not match, further investigation and adjustments may be necessary. |
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Term
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Definition
| GCT is a value-added tax (VAT) imposed on the supply of goods or services within Jamaica (above a minimum turnover threshold) and on the import of goods or services to Jamaica. The annual turnover GCT registration threshold is currently JMD 10 million. The standard rate of GCT is currently 15%. |
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Term
| Customs duties and related imposts |
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Definition
| Customs duty is levied on the customs value of goods imported, which is determined in accordance with the World Trade Organization (WTO) rules on customs valuation. The rates are specified by a prescribed Customs Tariff, having regard (where appropriate) to the Common External Tariff agreed between Caribbean Community (CARICOM) member states. |
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Term
| Customs Administration Fee (CAF) |
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Definition
| Historically, a CAF of JMD 3,000 has been imposed on each Export Declaration filed with the Jamaica Customs Agency (JCA). This has created a significant cost for exporters, particularly manufacturers of crafts and other artisan products who export in low volumes on a retail basis via online sales. |
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Term
| Special consumption tax (SCT) |
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Definition
| SCT is imposed at various rates on the importation or local manufacture of ‘prescribed goods’ (i.e. certain petroleum products, ethanol, alcoholic drinks, tobacco, and motor vehicles). |
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Term
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Definition
| All land in Jamaica is valued for property tax purposes on the 'site value' or 'unimproved value' (as reflected on the 2013 Property Valuation Roll). Property tax is levied by reference to various value bands at a scale of rates ranging from 0.50% to 0.90%. |
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Term
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Definition
| A transfer tax of 2% is applicable on the consideration payable (or market value in certain instances) on the transfer of land, buildings, securities, and shares (provided that a refund is available where the transfer tax charged exceeds 37.5% of the capital gain made). Transactions in listed securities on the Jamaica Stock Exchange (JSE) are exempt from transfer tax. |
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Term
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Definition
| Stamp duty is imposed on a wide variety of legal instruments. The rate of stamp duty depends on the legal instrument involved. Transfers of listed securities on the JSE are exempt from stamp duty. |
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Term
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Definition
| Payroll taxes are imposed at the national level on emoluments paid by employers to their employees, including (subject to certain conditions) expatriates who undertake work in Jamaica. The taxes comprise Pay-As-You-Earn (PAYE) Income Tax, Education Tax, and contributions to the National Housing Trust (NHT), the National Insurance Scheme (NIS), and the Human Employment and Resource Training (HEART) Trust. |
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Term
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Definition
Emoluments are the returns arising from office or employment usually in the form of compensation or perquisites. E.g., Salary, Wages, Overtime, Motor Vehicle Upkeep, Travelling Allowance, Uniform Allowance, Meal Allowance etc.
Emolument can be both taxable and non-taxable usually determined by either your employer or the Inland Revenue Service. |
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Term
| National Insurance Scheme (NIS) contributions |
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Definition
| Employees and self-employed persons are required to be insured under a state-administered programme of social security insurance. Employees and employers contribute at a rate of 3% (each) on a maximum remuneration of JMD 1.5 million per annum. Self-employed persons contribute at a rate of 6% on maximum earnings of JMD 3 million per annum. The income threshold for both employed and self-employed individuals increased to JMD 5 million per annum with effect from 1 April 2022. NIS contributions are tax deductible. |
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Term
| National Housing Trust (NHT) contributions |
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Definition
NHT contributions are made by employers at the rate of 3% while employees contribute at the rate of 2% on all taxable emoluments received from employment in Jamaica. Self-employed persons also contribute at a rate of 2% of earnings. An employer's contribution is tax deductible but that of an employee is not. Employee’s contributions are refunded after seven years, and an employer's contribution is not refundable.
Expatriate employees, on application, are entitled to a refund of their contributions when they leave the island permanently. |
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Term
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Definition
| Education Tax is charged at the rates of 3.5% for employers and 2.25% for employees after the deduction of NIS contributions and contributions to an approved superannuation scheme. Only the employer's contributions are tax deductible, and the amounts paid are not refundable to either the employer or the employee. |
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Term
| Pay As You Earn (P.A.Y.E) |
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Definition
| In general, Jamaican residents and domiciled individuals are taxed on their worldwide income, while non-resident individuals are taxed on Jamaican-sourced income. A non-Jamaican domiciled individual is generally not taxable on foreign-sourced income unless one remits this to Jamaica. Notwithstanding this, a non-domiciled individual working in Jamaica is taxed on the compensation attributable to services rendered in and in relation to Jamaica (subject to certain exceptions) as well as Jamaican-sourced income. |
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Term
| Human Employment and Resource Training (HEART) contributions |
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Definition
| HEART contributions are payable monthly by employers only, at the rate of 3% of the wage bill. The contributions are tax-deductible. |
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Term
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Definition
A P45 is an official certificate that your employer will give to you when you terminate your employment with them. It will have several details on the document including:
• Tax code
• Gross pay
• The amount of tax you have paid for the year
• Employer details |
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Term
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Definition
What is a P46?
For those entering their first role, a P46 form is used in replacement of a P45. If a professional did not receive a P45 upon leaving their last company, then a P46 will also be used.
In this case, the employee will be asked to fill out a new starter checklist form. This form will ask for personal details about previous employment and will help determine which tax code should be used before your first pay date. |
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Term
| What is voluntary deduction? |
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Definition
| Voluntary deductions are amounts that an employee has elected to have subtracted from gross pay. Examples are group life insurance, healthcare and/or other benefit deductions, Credit Union deductions, etc. These can be cancelled at the persons requests. |
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