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Bookkeeping and Accountancy Glossary

Get to grips with accounting terms with this handy glossary. For those of you who are feeling a little daunted by the amount of jargon that exists in accountancy I have listed some glossary terms that might help you to feel more comfortable when discussing your bookkeeping requirements.

Getting to grips with Bookkeeping and Accounting terminology

A periodical record of financial transactions.

Recording transactions when they take place, rather than upon payment.

Loaned money, or part of a payment to be made at a later date.

Aged Debtors
Persons who have been in debt for longer than the normal timescale.

The total sum, everything added together.

Allowable Deductions
Income deductions allowed by the Inland Revenue, which in turn reduce your tax payment.

Allowable Expenses
Business expenses which may be claimed against your tax payment.

Allowable Losses
Losses allowed on the sale of business assets, which may be set off against gains.

Regular repayment of a loan, covering interest due first, then reducing the principal.

Annual Accounts
Financial year end accounts.

Annual Income
Money received during a calendar year.

When an asset increases in value, i.e. buying business premises which are then valued at a higher sale price.

Annual Percentage Rate (which includes fees and other associated charges).

An item of value.

Bad Debt
A debt which will not be paid, and must be written off as a loss in the accounts.

Balance Sheet
Statement showing the worth of your Business at the year end, in terms of historical cost.

Bank Overdraft
Borrowing facility, repayable upon demand.

Bought Ledger
A book for recording all business purchases.

Break-even Point
Production = Fixed cost

A financial statement forecasting expected expenditure and income. Useful as a planning tool.

Capital Accounts
An account which deals with monetary investment / withdrawals made by the owners of the company.

Capital Expenditure
Purchases of fixed assets which will have a lasting benefit to the business, i.e. premises, machinery, equipment.

Capital Gain
Money made by selling a fixed asset.

Capital Loss
Money lost by selling a fixed asset.

Cash Accounting
The method of accounting where purchases and sales are recorded in the accounts books when they actually occur.

Cash Flow
Money coming in and going out of the business.

Cash Flow Forecast
A guide indicating forthcoming budgeted receipts and payments.

Charitable Deductions
Deductions from taxable income as charity donations.

Contingency fund
Put aside funds for use in an emergency.

The term used for off-setting debits against credits, to zero out.

Credit Period
The time allowed between the supply and invoicing of goods, and the payment of the invoice.

Persons owed money by your business. (Your liabilities).

Current Assets
Items which are cash, or can be readily turned into cash, i.e. cash, bank balances, debtors, stock, work in progress.

Current Liabilities
Amounts owed to Suppliers (Creditors), and short term loans, i.e. bank overdraft.

Person who owe money to your business.

Put back to a later date/postpone.

The difference between spending over income.

The allowance made for reduction in value of assets, i.e. the loss in value of an aging car.

Direct Costs
Amounts directly relating to product production.

The payment of money.

Double-entry Book-keeping
A way of accounting whereby all transactions are recorded twice; as a simultaneous credit and debit.

To make enough money to provide a profitable return.

The sum of money spent.

Money paid to a person to cover their own out-of-pocket costs when carrying out actions on behalf of the business, i.e. travel mileage, lunches, etc.

Financial Year
The 12 month period for which you produce your accounts; not the same as a Calendar year.

Fixed Assets
The property and equipment owned by your business which will continue to be of a lasting benefit.

Not allowed to be either changed or used.

The total prior to deductions.

Imprest System
A petty cash transactions system. Money is advanced for small expenses, when almost spent, receipts to the value are handed over and the money reimbursed. The float should therefore always remain at the same level.

Indirect Costs
Amounts not directly relating to production, but are necessary to run the business, i.e rent, telephone, insurances, etc.

Interim Payment
Payment made on account. Part of a dividend.

A written note requesting payment for goods/services supplied.

Key Ratios
A way of measuring the performance of your business when conventional analysis cannot. These provide a view of where the business is at.

Debts of the business.

Long Term Liabilities
Amounts owing, but not due for payment within one year.

Extra time/space allowed. Also means difference in value of sales price and purchase price.

The end value once all deductions have been made.

Net Assets
Total assets of the business less liabilities.

Net Profit
Profit of the business once all expenses have been met.

Probable but not exactly quantifiable.

Balance one item off against another, to cancel each other out.

Regular expenses made in keeping the business running, i.e. rent, phones, wages, etc.

Per Annum
In a year. Per Capita For each person.

An advance payment, i.e. rental monies.

Person or company represented by an Agent.

Basic point / general rule

Profit and Loss Account
A periodic summary of income and expenditure which shows surplus and/or deficit.

Profit Margin
Percentage difference between sales income and cost of sales.

Use your judgement.

Purchase Ledger
A book for recording all business expenditure.

Quick Assets

A term used to describe current assets which may be readily cashed in if required.

Reconcile / Reconciliation
To make two statements agree.

Payment for services rendered.

Revenue Expenditure
Fully used up during the accounting period, i.e. raw materials, rent, salaries.

Sales Ledger
A book for recording all business sales (income).

The value of sales of goods / services

We hope that this list of bookkeeping terms will help to lessen your fear of an accounting industry that can feel overwhelming to some.