Glossary

• Accounts
  A report of a company's financial performance over the previous year
• Accounts payable
  Money owed by a company to its suppliers or creditors.
• Accounts receivable
  Money owed to a company by its customers, for goods or services delivered on credit.
• Accruals
  Recognition of income and expenses in financial statements when they are earned or incurred, rather than when cash is received or paid.
• Accrued Expenses
  Expenses that have been incurred but not yet paid.
• Assets
  Economic resources owned or controlled by an individual or business, which are expected bring future benefits.
• Audit
  A systematic and independent examination of a company's financial records and systems by a qualified professional.
• Bad debt
  Revenue that is unlikely to be collected from customers and is written off as a loss.
• Balance sheet
  A financial statement that shows a company's assets, liabilities, and equity at a given point in time.
• Bank Reconciliation
  The process of comparing a company's cash book with its bank statement to ensure that they are consistent.
• Bookkeeping
  The process of recording financial transactions in a systematic and organized manner.
• Break point
  The level of sales at which the total costs of a business equal its total revenue, resulting in no profit or loss.
• CapEx
  Funds by a company to acquire or improve long-term assets, such as property, plant, and equipment.
• Capital Expenditure
  Funds by a company to acquire or improve long-term assets, such as property, plant, and equipment.
• Capital gains tax
  A tax on the profit made from selling assets such as, shares, or business assets.
• Cash Accounting
  An accounting method that records transactions when cash is received or paid.
• Cash flow statement
  A financial statement that details the in and outflow of cash in a company.
• Chart of account
  A chart of accounts is a list of financial accounts set up, usually by an accountant, for an organization, and available for use by the bookkeeper for recording transactions in the organization's general ledger.
• Corporation tax
  A tax levied on the profits of UK limited companies.
• Corporation Tax Self Assessment
  CTSA; A system for limited companies to their profits and pay tax on them to HMRC.
• Cost of Goods Sold
  The total cost of producing the goods sold by a company during a specific period.
• Credit
  An accounting entry that decreases an asset or expense account, or increases a liability or income account.
• Credit Note
  A document issued by a seller to a buyer, indicating a refund or reduction in the amount owed for goods or services.
• Current assets
  Assets that expected to be converted to cash within a year, such as inventory and accounts receivable.
• Debit
  An accounting entry that increases an asset or expense account or decreases a liability or income account.
• Deferred tax
  A tax that is not payable immediately but will be due in the future
• Depreciation
  The decrease in value of a tangible asset over time due to wear and tear, aging, or obsolescence.
• Direct Debit
  A financial instruction that allows a person or company to automatically withdraw money from a bank account to pay regular bills or other recurring payments.
• Dividend
  payment made by a company to its shareholders from the profits it has made.
• Double-entry Bookkeeping
  An accounting system that records each transaction as a debit and credit in separate ledger accounts.
• Equity
  The residual interest or claim of the owners in an entity's assets after deducting liabilities.
• Expenses
  Costs incurred in the-to-day running of a business, such as rent, utilities, and salaries.
• Financial ratios
  Quantitative measures used to determine a company's financial performance and health.
• Financial year
  The 12-month period used for reporting a company's performance.
• Fixed assets
  Assets that are intended for long-term use in a, such as property, plant, and equipment.
• FRS
  Financial Reporting Standards; A set of UK accounting standards.
• General Ledger
  The master set of accounts that summarises all of a company's transactions.
• Goodwill
  The value of a business's reputation and relationships with customers, suppliers, and employees.
• Gross profit
  A company's total revenue minus the cost of goods sold
• HMRC
  His Majesty's Revenue and Customs is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support, the administration of other regulatory regimes including the national minimum wage and the issuance of national insurance numbers.
• Income statement
  A statement that shows a company's revenues, expenses, and profit or loss over a period of time.
• Inheritance tax
  A tax on the estate of a person who has.
• Intangible assets
  Non-physical assets such as patents, trademarks, and goodwill.
• International Accounting Standards
  IAS; A set of internationally recognized accounting standards.
• Inventory
  The goods a has on hand for sale.
• Invoice
  A document listing the goods or services provided and their prices, and requesting payment.
• ITSA
  Income Tax Self-Assessment (ITSA) is a part of Making Tax Digital (MTD). From 6 April 2024. Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for ITSA from 6 April 2024.
• Journal Entry
  A record of a financial transaction in a company's accounting system.
• Leasing
  A contract in which a business rents equipment or property from a lessor for an agreed period.
• Ledger
  A ledger is a book or collection of accounts in which account transactions are recorded. Each account has an opening or carry-forward balance, and would record each transaction as either a debit or credit in separate columns, and the ending or closing balance.
• Liabilities
  obligations to repay a debt or provide goods or services to another entity.
• Liquidity
  The ability of a business to meet its short-term financial obligations.
• Long-term liabilities
  Debts or financial obligations that are in a period longer than one year.
• Management Accounts
  Financial reports used by the management of a company to inform their decision-making.
• MTD
  Making Tax Digital (MTD) is a UK government initiative that sets out to make tax administration more effective, more efficient and simpler for taxpayers. The first mandatory use of digital methods was for Value Added Tax, beginning in April 2019 for many businesses and organisations.
• Net profit
  The amount of revenue that remains after all costs, expenses, and taxes have been paid.
• Nominal code
  Nominal codes are the codes that are used in the chart of accounts to record income and expenditure.
• Operating expenses
  The costs incurred in the day-to-day running of a business, such as rent, utilities, and salaries.
• Overheads
  Indirect costs of running a business, such as rent, administration, and insurance.
• Owners' equity
  The residual interest claim of the owners in an entity's assets after deducting liabilities.
• P&L
  A financial statement that shows a company's revenue, expenses, and net profit or loss over a period of time.
• PAYE
  Pay As You Earn: A system for deducting income tax and National Insurance contributions from employees' pay.
• Payroll
  The process of calculating and distributing employee wages and salaries, including deductions for taxes and benefits.
• Petty Cash
  A small amount of cash kept on hand for minor purchases or expenses.
• Prepayments
  Expenditures made for goods or services that will be received or consumed in a future period.
• Profit after tax
  PAT; The remaining profit after all expenses, including taxes, have been deducted the company's revenues.
• Profit and Loss Statement
  A financial statement that shows a company's revenue, expenses, and net profit or loss over a period of time.
• Profit before tax
  PBT; The profit earned by a company before any taxes are accounted for.
• Provision
  An amount set aside as an estimation for a future liability, such as warranty claims or employee benefits.
• Purchase Invoice
  Document from or raised by a buyer to record payment for goods or services that have been bought. Detailing quantities, prices, and any applicable taxes or discounts.
• Purchase Invoices
  Document from or raised by a buyer to record payment for goods or services that have been bought. Detailing quantities, prices, and any applicable taxes or discounts.
• Purchase Order
  A document issued by buyer to a seller, listing the goods or services required and their prices, and authorising the purchase.
• Reconciliation
  The process of verifying the accuracy of financial records by comparing them supporting documents or records.
• Retained earnings
  Net income that is retained in the business instead of being distributed to shareholders as dividends.
• Revenue
  Income earned through the sale of goods or services.
• Sales Invoice
  Document from a seller to a buyer to request payment for goods or services that have been sold. Detailing quantities, prices, and any applicable taxes or discounts.
• Self Assessment
  A system for individuals to report their income and pay tax on it to HMRC.
• Share capital
  The amount of money raised by a company by issuing and selling shares to investors.
• Sole trader
  A business owned and operated by one person.
• Taxation
  The process of imposing taxes on individuals and businesses.
• Trial Balance
  A list of all the balances in the general ledger, used to check that debits equal credits.
• Turnover
  The total sales made by business in a given period.
• VAT
  Value Added Tax; A tax on the value added by a business to goods and services it provides.
• Working capital
  The amount money a business has available to pay its short-term debts and expenses.