Accounting Glossary - Terms that may have you confused.
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.Account
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.
Persons who have been in debt for longer than the normal timescale.
The total sum, everything added together.
Income deductions allowed by the Inland Revenue, which in turn reduce your tax payment.
Business expenses which may be claimed against your tax payment.
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.
Financial year end accounts.
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.
A debt which will not be paid, and must be written off as a loss in the accounts.
Statement showing the worth of your Business at the year end, in terms of historical cost.
Borrowing facility, repayable upon demand.
A book for recording all business purchases.
Production = Fixed cost
A financial statement forecasting expected expenditure and income. Useful as a planning tool.
An account which deals with monetary investment / withdrawals made by the owners of the company.
Purchases of fixed assets which will have a lasting benefit to the business, i.e. premises, machinery, equipment.
Money made by selling a fixed asset.
Money lost by selling a fixed asset.
The method of accounting where purchases and sales are recorded in the accounts books when they actually occur.
Money coming in and going out of the business.
Cash Flow Forecast
A guide indicating forthcoming budgeted receipts and payments.
Deductions from taxable income as charity donations.
Put aside funds for use in an emergency.
The term used for off-setting debits against credits, to zero out.
The time allowed between the supply and invoicing of goods, and the payment of the invoice.
Persons owed money by your business. (Your liabilities).
Items which are cash, or can be readily turned into cash, i.e. cash, bank balances, debtors, stock, work in progress.
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.
Amounts directly relating to product production.
The payment of money.
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.
The 12 month period for which you produce your accounts; not the same as a Calendar year.
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.
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.
Amounts not directly relating to production, but are necessary to run the business, i.e rent, telephone, insurances, etc.
Payment made on account. Part of a dividend.
A written note requesting payment for goods/services supplied.
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.
Total assets of the business less liabilities.
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.
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.
Percentage difference between sales income and cost of sales.
Use your judgement.
A book for recording all business expenditure.
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.
Fully used up during the accounting period, i.e. raw materials, rent, salaries.
A book for recording all business sales (income).
The value of sales of goods / services