Glossary of Accounting Terms

Accounting System a manual or computerised method of recording all financial details and transactions
Accrual Accounting an accounting method where transactions are recorded when they occur rather than when cash is exchanged
Asset – Current all items a business owns that are expected to be used with 12 months, including cash
Asset – Fixed Asset all items a business owns that are expected to last longer than 12 months
Balance Sheet Report a statement of a business’s financial worth at a particular point in time, showing assets, liabilities, who invested in the business and how the invested have been used
Bookkeeping recording financial transactions and data
Cash Accounting an accounting method where transactions are recorded when cash is exchanged rather than when the transactions actually occurred
Cash Book where bank and cash transactions are recorded
Cash Flow cash available after expected income received and purchases spent
Cash Flow Forecasting calculation of cash available after expected income received and purchases spent at particular points in time
Companies House incorporates and dissolves limited companies, examines and records company information under the Companies Act and makes company information available to the public
Company Number a unique number issued by Companies House when a business is incorporated
Corporation Tax a tax paid by limited companies on their earnings
Cost of Sales the costs directly involved in the production of goods sold
Credit Check a report showing a company’s credit history and rating
Credit Control procedures to ensure customers pay invoices by an agreed date
Director a person who leads or supervises a limited company
Director’s Loan Account a temporary loan from a business to one of its directors
Dividends distribution of profits by a limited company to its shareholders
Expenses all costs of operating a business
Expense Claim a document from an employee for reimbursement of business costs paid from their personal funds
Income money earned by a business from its trading activities
Income Tax a tax paid by individuals on all their earnings through employment and self-employement
Incorporated Company a business that has been created and registered with Companies House
Invoice – purchase a document listing goods or services received from a supplier showing price, VAT and total amount
Invoice – sales a document listing goods or services supplied to a customer showing price, VAT and total amount
Liability – Current a business debt due for payment within the next 12 months
Liability – Long term a business debt expected to be paid in more than 12 months
Limited Company a business that has been incorporated at Companies House
Loss more money has been spent than earned
Management Accounts accounting reports looking at historical data to make decisions about the future
National Insurance (NI) a government run insurance system into which employees, employers and self-employed make regular payments which is then used to provide money for the unemployed, elderly and ill.
Owner Drawings money or assets withdrawn from a business by the owner
Owner Investments money or assets invested into a business by the owner
P45 a form issued by an employer when an employee leaves work providing details of earnings and tax paid so far in the current financial year
P60 a form issued to all employees providing details of all earnings and tax paid during the previous tax year
PAYE Pay As You Earn system used by the HMRC to collect income tax and national insurance contributions from employees’ pay as they earn it
Payroll Bureau a company that is a specialist in all aspects of payroll
Personal expenses business expenses paid from personal funds and usually reclaimed
Petty Cash all cash kept on hand at a business location for incidental expenses
Profit – Gross sales minus cost of sales
Profit – Net gross profit minus all expenses
Profit and Loss Report statement of income and expenditure for a specified period
Quotation an estimate of costs
Purchase Order document issued from a buyer to a seller indicating the items, quantities and agreed prices the buyer wishes to purchase
Reconciliation comparing two sets of records to make sure they are in agreement
Revenue the income received in normal business activity
Self – Assessment (SA) a tax return completed each year to show any income received in addition to a salary as an employee
Shareholder a business, person or institution that owns at least one share in a company
Subsistence expenses such as accommodation and meals required to carry out business away from the usual business location
Terms of Payment specified conditions to be met in order to purchase, such as when payment is due
Transaction an agreement between a buyer and a seller
Turnover the income received in normal business activity
VAT (Value Added Tax) a tax charged on most business transactions of registered traders
VAT Return form stating VAT added to sales and reclaimed on purchases over a period, usually 3 months

Jan 15, 2014