A-Z of Accounting Terms for UK Business Owners
Posted on 28th July 2022 at 12:00
Whilst we’re here to manage all of your accounting tasks and provide expert tax planning advice, many of our clients like to know what the key accountancy terminology means when it comes to running their finances. Below is an A-Z of accounting terms to help you cut through the financial jargon.
Money that you owe to your suppliers in exchange for goods or services provided.
Money due from customers in exchange for products or services you’ve supplied to them.
Financial statements prepared at the end of a period, such as a month, quarter or full year. These outline your profit or loss during that period and explain where you stand financially.
The time period for which financial statements are prepared, such as a month, quarter or year.
An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged. The term "accrual" refers to any individual entry that records revenue or expense in the absence of a cash transaction.
Anything that a business owns or uses, such as equipment, machinery and commercial property.
An official inspection of an organisation's accounts, typically by an independent body. HMRC may organise an audit of your business by one of its tax inspectors to ensure that all dealings are compliant.
An amount of money owed to a creditor that is unlikely to be paid.
A statement of the assets, liabilities and capital of your business. This document shows details of the balance of income and expenditure over the preceding period.
Bookkeeping is the meticulous recording of your company’s financial transactions.
Every business should have a tailored strategy in place that will enable it to grow sustainably. We’re here to help!
An amount of finance provided, generally by the owners or shareholders, to enable a business to acquire assets and sustain its operations.
Cash flow projections
Statements detailing the cash that’s expected to flow into and out of your business over a particular period.
Tax payable by companies, based on the taxable profits of the period. Corporation tax is due payment 9 months and 1 day after the end of your accounting period for the previous financial year – usually 1st January.
Cost of goods sold
Any materials, labour and other costs directly related to the goods you sell and services you provide.
When referring to the terms of business, credit is when a supplier agrees to allow the customer to make payment within an agreed period after the delivery of goods or services. Typical trader credit periods range from 30 to 60 days, although this can differ according to the individual supplier.
Credit control is a business strategy that prevents late payments and the extending of credit to businesses that are unlikely to pay on time.
A document summarising the reduction in charge on an invoice. This could be because part or all of the product or service has been returned or cancelled.
A person or organisation that your business owes money to as payment for their goods/services.
An asset (such as equipment or land) that is expected to be converted into cash within the trading cycle.
A liability which is expected to be settled in the entity’s normal operating cycle, generally within 12 months after the balance sheet date.
In bookkeeping terms, debit is any entry in the debit column that represents a payment made or owed.
A person or organisation that owes money to your business for goods/services supplied.
Money received for goods or services which has not yet been earned.
The reduction of a tangible asset’s value over time, such as machinery or vehicles.
The person(s) appointed by shareholders of a limited company to manage its operations and affairs.
An amount paid to a shareholder, out of a company’s post-tax profits, as a reward for investment in the company. The amount of dividend paid is proportionate to the number of shares held.
Downturn in business
If you’re noticing a downturn in business, it’s crucial that you keep an eye on your cash and overheads. We can help you to stay in control of your finances, which in turn will enable you to overcome a downturn in business and prevent future occurrences.
Cash taken for personal use in sole trader or partnership businesses, treated as a reduction of ownership interest.
Entity and entities
Something that exists independently, such as a business which exists independently of the owner.
The remaining value of an owner’s interest in a company, after all liabilities have been deducted.
The costs involved in running a business. Expenses can cover all kinds of activity, such as business travel and accommodation, wages, leases and equipment.
A long-term tangible object owned by a business. Common examples are equipment, vehicles, buildings and land.
A cost that doesn’t change in line with the company’s sales activity, such as commercial rent, insurance and utilities.
A financial forecast gives an estimate of the future performance of the business based on historic cost/sales data and a prediction of upcoming business activity.
The total cost or value of something prior to any deductions.
Your sales total after subtracting costs related to the manufacturing, marketing and selling processes, but before tax and business operating costs are subtracted.
The original cost/value of an asset when acquired by the business.
Intangible fixed asset
An asset that isn’t physical in nature, such as intellectual property, trademarks, copyrights and patents.
Any stock, component parts or raw materials owned by your business.
A document provided to the customer by the supplier that summarises goods or services supplied, their individual costs, the total amount payable, and when payment need to be made.
A financial account (such as a bank account) owned by two or more people who share equal responsibility over the company’s finances.
Rather than buying an asset, leasing is when a business takes out a contract to essentially rent out the physical object or service.
Debts owed by your business.
A type of legal protection for the shareholders and owners of a business. As a result, they are not personally responsible for their company’s debts or financial losses.
The extent to which a business has access to cash, or items which can readily be exchanged for cash.
Management accounts are financial reports created on a monthly or quarterly basis that outline the financial performance of the business.
Making Tax Digital
HMRC has launched Making Tax Digital to ensure that businesses use computer software for their tax administration. This online system replaces paper/book-based ledgers.
The value of a company's assets minus its liabilities.
The amount of money your business earns after deducting all of its operating costs and tax bills during a specific period.
Accounting, payroll and tax planning are time-consuming and complex, which is why TreyBridge Accountants offers you the option to outsource these tasks to our team.
When two or more people oversee business operations and share its profits and liabilities.
The payment of a bill, operating expense or instalment loan before its official due date.
Profit and loss
A detailed financial statement that shows all revenues, expenses and profit.
A liability of uncertain timing or amount. For instance, your business could set aside money for an expense that you know is coming, even though the finer details are yet to be agreed.
We use QuickBooks accounting software for many of our clients, as it provides fast, secure and reliable online management of invoices, bills, tax and other financial activity.
R&D Tax Credits
If your business carries out any kind of research and development, you should be able to claim R&D Tax Credits that will help you to significantly lower your tax liabilities.
Profits set aside by the business for a specific purpose in the future.
The earnings of a business after wages, production costs, dividends and other fees have been accounted for.
A loan that has been offered by a lender against a particular asset. This gives the lender protection in the event that the loan is not paid back.
Self-assessment tax returns
A self-assessment tax return is used to calculate how much tax you owe to HMRC, which is worked out from the earnings you declare on the form. If you don’t have time to do this yourself, get in touch with TreyBridge today.
The owners of a limited company.
A self-employed individual who owns and operates a business on their own. Sole traders keep all of the profits of a business after tax has been paid and are also personally responsible for any losses.
Individuals, groups and organisations that are affected by the activity of the business, including its owners.
As with inventory, stock refers to any products, component parts or raw materials owned by the business.
Tangible fixed assets
Unlike intangible assets, a tangible fixed asset has a physical form. Common examples are machinery, buildings and land.
The total amount of revenue/sales after tax and VAT.
Undeposited funds account
A holding account that tracks payments received from customers that haven’t yet been deposited into the main bank account of the business.
Tax added to most products and services by a VAT registered business. If your taxable turnover is above £85,000 a year, your business must register for VAT, although you also have the option to do so beforehand.
The amount of cash available to the business once current liabilities (amounts owed within 3-12 months) have been subtracted.
We highly recommend Xero to business of all shapes and sizes, as it’s a secure, versatile and easy-to-use cloud accounting website and app that helps you to keep track of sales, bills, receipts and cash flow.
The period between the first day of the fiscal year and the current date.
A method of budgeting in which all expenses must be justified and approved for each new accounting period, rather than accepting them simply because they’re already in place.
Need help with accounting, payroll or tax planning?
We help sole traders, limited companies, partnerships, charities, trusts, individuals and families to navigate their numbers and pay less tax. To find out more, call our Yorkshire office on 01482 235575, our London office on 0207 885 0605, or fill in the contact form below.
Tagged as: Accountancy
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