Accounting terminology can be confusing if you are unfamiliar with the industry. Here we have compiled a list of some basic accounting terms and definitions to help you learn the ropes.
A
Accountant: a person who records financial information and activities, reviews revenue and expenses. They also prepare financial reports and statements for the company.
Accounts Payable (AP): The money a business owes to suppliers for goods and services
Accounts Receivable (AR): The money owed to a business from customers
Accrual: Costs which have been incurred but haven’t yet been invoiced or paid
Arrears: Money that is owed and should have already been paid
Assets: Any resources which are valuable and help the business to generate income. They can be tangible (cash, inventory, property) or intangible (patents, trademarks, goodwill)
Audit: An independent examination of a business’ financial records
B
Balance Sheet: A statement of assets, liabilities, and capital over a period of time
Billing: The act of sending an invoice to a customer
Bookkeeping: The process of recording and monitoring the financial affairs of a company
Budget: A plan detailing proposed income and expenses for the company
C
Capital: The financial assets used to fund business operations
Cash flow: The money going in and out of a business over a specific period
D
Debtors: Those who owe the business money
Deductibles: Purchases related to business affairs which can be claimed as business expenses, thus reducing income tax
Dividends: Money which is paid regularly to shareholders from business profits
E
Equity: The total value of a company
Expenses: Costs which keep the business running
F
Financial Statement: A formal record of the financial activities in a business
Financial Year: A 12 month period for accounting, reporting and tax filing. It runs from April to March the following year
G
Gross Profit: Total revenue minus the expenses to produce the goods or services
Goodwill: An intangible asset which increases the value of a business, such as reputation
H
HMRC: His Majesty’s Revenue and Customs, a department within the UK Government. HMRC manages taxes, insurance, wages and other financial data
I
Income: Any money which comes into the business
Invoice: A statement sent to a customer detailing the goods or services they were provided and the amount they owe
L
Ledger: A book or collection of financial accounts
Liability: The act of being legally responsible for something
M
Management Accounts: The process of analysing and reporting on financial data
Margin: The percentage of the sale price which is profit
O
Overheads: Day-to-day business running costs
P
Payroll: A list of employees and their wages, including bonuses or commissions
Profit: A financial gain when the revenue surpasses business expenses
Profit and Loss (P&L) Statement: Summary of a company’s revenue, costs and expenses over a specific period
S
Share capital: Money that is invested into the business by shareholders
Stakeholder: People who have a vested interest in the success of a business
T
Tax return: An annual statement of income and circumstances to determine the amount of tax which is owed
V
Value Added Tax (VAT): Consumption tax added to most goods and services
Y
Year end: The end of the financial year in March
This is a non-exhaustive list of accountancy and bookkeeping terms and definitions but you can learn more on our blog. At J Sweeney Accountants, our accounting specialists can help you understand your professional accounting needs. For more information, email [email protected] or call 01604 950034.
