Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsGlossary of TermsAs with any topic, there is a wealth of jargon and terminology associated withfi nancial management. It is helpful for you to understand these terms whenreading fi nancial statements or when talking to fi nance professionals such asbank managers. This will make you feel more confi dent and comfortable. Themost basic and useful of these terms are set out below.Accrual AccountingAccounting EntryAccounting PeriodAssetBreak-evenBudgetCapital ExpenditureCash AccountingCash Conversion RateCash FlowCost of Goods Sold(COGS)Recognising income and expenses when they occurrather than when they are received or paid forBasic recording of business transactions as debitsand creditsA period for which fi nancial statements are prepared(normally monthly and then annually)Anything having a commercial value that is owned bythe businessAmount (in either units or value), that the businessneeds to achieve before a profi t is generatedA fi nancial plan for a business (allocating money thatthe business forecasts it will receive and spend);typically done once a yearAmount of money that is allocated or spent onassetsAccounting for transactions as they are received orpaidOverall number of days to convert a trade from thecash outfl ow at the beginning of the working capitalcycle to cash received at the end of the cycleFlow of cash into and out of the businessTotal cost of all goods sold during the period6chapter 1 01-21 Eng.indd 68/15/11 5:01:22 PM