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Business Bookkeeping

Welcome to English as a Second Language Podcast number 232: Business Bookkeeping.

This is English as a Second Language Podcast episode 232. I’m your host, Dr. Jeff McQuillan, coming to you from the Center for Educational Development in beautiful Los Angeles, California.

Remember to visit our website at eslpod.com and download the Learning Guide for this episode.

In today’s episode, we’re going to talk about doing bookkeeping at a business.

Let’s get started.

[Start of story]

I have a day job, but I recently started a small business on the side. I didn’t know anything about accounting and my friend, Roland, said that he would give me some advice.

Roland: So, the reason that you need to do your bookkeeping is so you can manage your cash flow. Even if you have a lot of orders, you may still have problems paying your bills.

Magdalena: I see what you mean. Is this the kind of ledger I should be keeping?

Roland: Yes, definitely. You want to list your debits on this side and your credits on this side. This will help you figure out important things like your break-even point, your assets and liabilities, your administrative expenses, and whether you’re staying within your budget.

Magdalena: I wish I had an accounts payable department to help me with all this. I don’t even know how to create a balance sheet.

Roland: It’s not that hard if you use the right accounting program. The first thing to do is to keep track of your expenses. How do you do that now?

Magdalena: Oh, I have a system. I keep all my receipts in this bag.

Roland: Oh. Well, it’s good that you’re keeping your receipts but you’ll have to keep better track of them. What would you do if you were audited by the IRS?

Magdalena: Don’t even mention the IRS! I’ve got enough problems without worrying about them!

[End of story]

This podcast is all about business vocabulary related to accounting. The title of the podcast is “Business Bookkeeping.” Bookkeeping is keeping correct records of the money that you spend and receive. Usually, this is something that a company or an organization does.

The story begins by Magdalena saying that she has “a day job.” A day job is your regular job that you work at from nine in the morning ‘til five in the afternoon, for example. She also has “a small business on the side.” When we say we are operating or running a business on the side, we mean that it is extra, it’s an addition to your regular job. There are some other meanings of this expression, on the side, take a look at the Learning Guide for those additional definitions.

Magdalena continues by saying that she “didn’t know anything about accounting and” her “friend, Roland, said he would give” her “some advice.” Accounting is the job of keeping correct records of the money you spend; it’s very similar to bookkeeping. When we talk about bookkeeping, usually we’re talking about a person who keeps the books or the records for a company, but may not necessarily be an accountant. An accountant is someone who has a college degree and perhaps has a special certification - a special kind of training to do taxes and that sort of thing. So, accounting is usually something a little more complicated than bookkeeping, but they’re often used interchangeably as well that is, one for the other

Roland begins by saying that “the reason that you need to do your bookkeeping is so you can manage your cash flow.” Cash flow, “flow,” means having enough money to run your business - to pay your bills. You may, for example, have to pay a lot of bills at the beginning of the month but most of your money doesn’t come until the end of the month, so you have to plan to make sure that when the new month begins, you still have enough money to pay. This is part of cash flow.

Roland says, “Even if you have a lot of orders, you may still have problems paying your bills.” A lot of orders means a lot of things that people want to buy from you. But, if they don’t pay you right away - they don’t pay you immediately then you need to have extra money to pay your bills.

Magdalena says, “I see what you mean. Is this the kind of ledger I should be keeping?” A ledger, “ledger,” is a book or, nowadays, a computer program where a business or an organization puts down the money - records the money that it spends and it receives. So, a ledger is a tool that you use in bookkeeping and accounting. It’s a list of the things that you have spent your money on and that you have received money for.

Roland says that it is the kind of ledger that she needs. He says you’ll, “want to list your debits on this side and your credits on” the other side. A debit, “debit,” is money that you spend - money that goes out. Credit, “credit,” in accounting, is money that you receive - money that comes in to the company.

Roland goes on to say that, “This will help you figure out important things like your break-even point.” Your break, “break,” (hyphen) even, “even,” point is when you are getting more money in than you are spending. There’s more money coming in - what we would call revenue - than there is going out - what we would call expenses. After you get to that point, you start to make money; it’s very simple!

Your assets and liabilities are also things that you can keep track of, or make sure that you have a list of in a ledger. Assets, “assets,” are things they have value - things that are worth money - things that your business owns, such as a building or certain materials you use to make your product. Liabilities, “liabilities,” are the things that you have to pay someone else. They’re things that you owe to someone else, “owe,” meaning you have a loan, for example, and you need to pay the loan; that would be a liability.

Roland says Magdalena can also keep track of her “administrative expenses.” We know expenses is money that you spend - money that the company uses to pay its bills - to buy things. Administrative is related to the cost of operating your business - your telephone bill, your electricity bill and so forth.

Roland finally says this will also help you know if you are “staying within your budget.” A budget, “budget,” is a plan for how you are going to be spending your money, in this case. To stay within your budget is an expression that means not to spend more than you had planned to spend.

Magdalena says that she wished she “had an accounts payable department to help” her “with all this.” Accounts payable, “payable,” is the money that a company owes someone else. In most big companies, there’s an accounts payable department, and these are the people who pay the bills of the company.

The opposite would be accounts receivable, and accounts receivable are the people that take the money in - keep track of the money that the company gets from its customers.

She also says that she doesn’t “know how to create a balance sheet.” A balance sheet, “balance,” sheet, “sheet,” is a document that tells you how much money how much you have in assets - things that are worth money, and how much money you have paid - how much you owe other people. This is a balance sheet. Usually you can see if a company is in good financial condition - in good financial shape - by looking at its balance sheet - a list of all of the things the company gets in and all the things that the company spends. A balance sheet is like a short summary of the company’s financial situation.

Magdalena says she has a system to keep track of her expenses. Remember, expenses is money that you pay someone for the things that your company uses.

Magdalena’s system is to keep all of her receipts in a bag. Receipts, “receipts,” are pieces paper that show that you have paid something to someone. So, when you go to the store and you buy a new shirt, the store will give you a receipt saying here’s how much you spent. It’s very important for businesses to keep their receipts because the government may want to know if they have proof evidence - that they paid these expenses.

That’s why Roland says that she needs to prepare in case she is “audited by the IRS.” The IRS stands for the Internal Revenue Service, and it’s the department in the government that takes care of all of the taxes. To audit someone, “audit,” is to look very carefully at the money that they have spent to make sure that it is correct. The government wants to make sure that you have not claimed more expenses than you really had. To claim expenses, “claim,” is to say to the government - to the IRS - “Well, we spent this much money, and we can prove that with some receipts.” If you can’t prove it with receipts, and the IRS decides to look at your financial records, and they think that you are cheating the government - you’re not paying enough taxes - well, you don’t want to be in that situation because you may end up going to jail!

Magdalena ends the dialogue by saying, “Don’t even mention the IRS” - don’t talk about the IRS. I have “enough problems without worrying about them!”

Now let’s listen to the dialogue, this time at a native rate of speech.

[Start of story]

I have a day job, but recently started a small business on the side. I didn’t know anything about accounting and my friend, Roland, said that he would give me some advice.

Roland: So, the reason you need to do your bookkeeping is so you can manage your cash flow. Even if you have a lot of orders, you may still have problems paying your bills.

Magdalena: I see what you mean. Is this the kind of ledger I should be keeping?

Roland: Yes, definitely. You want to list your debits on this side and your credits on this side. This will help you figure out important things like your break-even point, your assets and liabilities, your administrative expenses, and whether you’re staying within your budget.

Magdalena: I wish I had an accounts payable department to help me with all this. I don’t even know how to create a balance sheet.

Roland: It’s not that hard if you use the right accounting program. The first thing to do is to keep track of your expenses. How do you do that now?

Magdalena: Oh, I have a system. I keep all my receipts in this bag.

Roland: Oh. Well, it’s good that you’re keeping your receipts but you’ll have to keep better track of them. What would you do if you were audited by the IRS?

Magdalena: Don’t even mention the IRS! I’ve got enough problems without worrying about them!

[End of story]

The script for today’s podcast was written by Dr. Lucy Tse.

If you have a question or comment about ESL Podcast, you can send us an email at eslpod@eslpod.com.

From Los Angeles, California, I’m Jeff McQuillan. Thanks for listening. We’ll see you next time on ESL Podcast.

English as a Second Language Podcast is written and produced by Dr. Lucy Tse, hosted by Dr. Jeff McQuillan. This podcast is copyright 2006.