Accounting glossary and FAQ
This page explains the accounting terms used in TrakIT and answers common questions. For an overview of the module, see Accounting. For TrakIT’s general terms, see the Glossary; for questions about the rest of TrakIT, see the General FAQ.
Glossary
Section titled “Glossary”| Term | Meaning |
|---|---|
| Account master | A type of charge, such as freight or handling, used on quotations, finance jobs, invoices, bills and internal postings. It can be linked to a ledger account, which then takes its postings. Not to be confused with a ledger account. |
| Accounts payable | What the company owes its suppliers. Bills credit the Default AP Account; payments debit it. |
| Accounts receivable | What customers owe the company. Invoices debit the Default AR Account; receipts credit it. |
| Base currency | The currency a company’s books are kept in: its Default Currency. |
| Booking rate | The exchange rate an invoice or bill is posted at. Its adjustments and write-off, and the receipts and payments that settle it, use the same rate for it. |
| Chart of accounts | The list of a company’s ledger accounts, in five categories (Assets, Equity, Liabilities, Revenue and Expense), each divided into groups. |
| Child account | A ledger account that takes postings. It always sits under a parent account. |
| Closing entry | The Year-End Closing entry posted when a financial year is closed. It brings revenue and expense accounts to zero and puts the result on retained earnings. |
| Debit, credit | The two sides of a journal entry: each journal line is either a debit or a credit. Debits increase assets and expenses; credits increase liabilities, equity and revenue. In every entry, the debits equal the credits. |
| Default accounts | The ledger accounts that automatic postings use, chosen under Auto-Posting Default Accounts on the Chart of Accounts page. |
| Document currency | The currency of an invoice, bill, receipt, payment, internal posting or journal entry. |
| Double-entry bookkeeping | Recording every amount twice, as a debit on one account and a credit on another, so the books always balance. |
| Finalize | The step that confirms an invoice, bill, receipt or payment. In a company that keeps its books in TrakIT, it also posts the document. |
| Financial year | An accounting period of a company, usually one year. Every journal entry belongs to one. See Financial years. |
| Foreign-currency account | A child account held in a currency other than the base currency, such as a bank account in US dollars. It keeps both its currency balance and its base value. |
| FX revaluation | Restating the balances held in other currencies at the exchange rate of a chosen date, and posting the difference as an unrealized gain or loss. |
| Journal entry | One record in the books: two or more lines on ledger accounts whose debits equal their credits. The journal is the list of all entries. |
| Ledger account | An account of the chart of accounts, such as a bank account, accounts receivable or freight revenue. |
| Opening balances | The balances the accounts had when the company started keeping its books in TrakIT, posted on the first day of its first financial year. |
| Parent account | A ledger account that groups other accounts and shows their total. Nothing can be posted to it. It has a folder icon. |
| Post | To record in the books as a journal entry. |
| Realized exchange difference | The gain or loss when a receipt or payment in a foreign currency settles invoices or bills booked at another rate. |
| Retained earnings | The equity account that receives each year’s profit or loss when the year is closed. It has the Special Code RE. |
| Reversal | An entry with the same lines as an earlier entry on the opposite sides, which cancels it. TrakIT posts one when a posted document is reset. |
| Settlement rate | The exchange rate from the table on the transaction date of a receipt or payment. |
| Special code | A code that marks an account TrakIT needs to find. The only one is RE, for retained earnings. |
| Unrealized exchange difference | The gain or loss from restating balances in other currencies at a later rate, posted by the FX revaluation. |
| Withheld tax | Tax a customer deducts from an invoice and pays to the tax authority for you. It goes to the Withheld Tax Account. |
| Withholding tax payable | Tax you deduct from a supplier’s bill and owe to the tax authority. It goes to the Withholding Tax Payable account. |
| Write-off | Writing off the outstanding balance of an invoice that will not be paid, against an account you choose. |
Why didn’t my invoice create a journal entry?
Section titled “Why didn’t my invoice create a journal entry?”An invoice posts only when you select Finalize: approving it does not post it. It also posts only if the company keeps its books in TrakIT, which means its finance system is TrakIT and it has a chart of accounts. Invoices finalized before that are not posted then. See Automatic posting.
Why can’t I finalize a document?
Section titled “Why can’t I finalize a document?”When the company keeps its books in TrakIT, finalizing posts the document. If the posting cannot be made, for example because no open financial year covers the document’s date or a default account is missing, the document is not finalized and the message says why. See When posting fails.
Can I edit or delete a journal entry?
Section titled “Can I edit or delete a journal entry?”No. A posted entry can be neither changed nor deleted. To correct an entry you posted by hand, post another entry the opposite way. To correct a document’s entry, reset the document: TrakIT reverses its entry, and posts a new one when the document is finalized again.
I reset a document and finalized it again. Is it in the books twice?
Section titled “I reset a document and finalized it again. Is it in the books twice?”No. The journal shows the original entry, its reversal and the new entry. The original and its reversal cancel each other, so only the new entry counts.
How do I correct a document from a closed year?
Section titled “How do I correct a document from a closed year?”Its entry cannot be reversed, so the document cannot be reset. Post a correcting entry dated in an open year instead, by hand or, for an invoice, with a credit note dated in an open year.
Why can’t I choose an account on a journal entry?
Section titled “Why can’t I choose an account on a journal entry?”The list offers only active child accounts of the company. Parent accounts never take postings. An account held in a foreign currency appears only on entries in its own currency.
Can I change the base currency?
Section titled “Can I change the base currency?”Not once the company has an open financial year, or anything posted in its books.
Can I change or delete a financial year?
Section titled “Can I change or delete a financial year?”No. Once created, a financial year cannot be changed or deleted, and once closed it cannot be opened again. Check the start date before you create the first year.
Why won’t the year close?
Section titled “Why won’t the year close?”In order of likelihood: its end date has not passed yet; the next year has not been created; or no active account has the Special Code RE. The message tells you which. See Financial years.
The Balance Sheet does not balance. What should I check?
Section titled “The Balance Sheet does not balance. What should I check?”Read the warnings under it. If earlier financial years are still open, close them: their profit has not reached retained earnings yet. If the ledger itself does not balance, check the Trial Balance and report the difference to your administrator.
Why does the Profit & Loss of a closed year still show a profit?
Section titled “Why does the Profit & Loss of a closed year still show a profit?”The Profit & Loss leaves out the year-end closing entry, so a closed year still shows its result.
Why is an inactive account on the Trial Balance?
Section titled “Why is an inactive account on the Trial Balance?”It had a balance on the date of the report. An account can be made inactive only when its balance is zero, but on an earlier date it may still have had one.
Does Mark as Paid change the books?
Section titled “Does Mark as Paid change the books?”No. Only a receipt reduces what the customer owes in the books.
Do quotations or estimates affect the books?
Section titled “Do quotations or estimates affect the books?”No. Only finalized invoices, bills, receipts and payments, approved internal postings, write-offs and journal entries reach the books. For how a quotation leads to invoices and payments, see From quotation to payment.
Can a receipt in euros pay an invoice in US dollars?
Section titled “Can a receipt in euros pay an invoice in US dollars?”No. A receipt or payment can be allocated only to invoices or bills in its own currency.
Where do the exchange differences in my Profit & Loss come from?
Section titled “Where do the exchange differences in my Profit & Loss come from?”Receipts and payments in other currencies post realized differences, and the FX revaluation posts unrealized ones. Both go to the FX Gain/Loss Account. Open that account on the Chart of Accounts page to see each entry. See Multi-currency accounting.
When should I run the FX revaluation?
Section titled “When should I run the FX revaluation?”At each period end you report on, and always as of the last day of the year before you close it. Running it again in the same year replaces the previous run.
Who can do what?
Section titled “Who can do what?”See Accounting.