Accounting jargon dictionary (A-C)
Posted on 11th March 2021
At Effective Accounting – we always talk in Plain English – to ensure you fully understand your accounts and tax returns. This is really important to us and follows one of our core values to be HUMAN.
If your accountant doesn’t, and the language they use often leaves you scratching your head – here is a quick guide to some of the jargon! Part 1 covers A-C – more to follow!
Accruals
Matching your sales and expenses from the year to the work that was carried out.
Accrual journal
An expense which occurred in the next trading year but relates to the prior year.
Accrued expenses
An adjustment made to expenses that were incurred but hadn’t been recorded in the accounts.
Accrued income
Income earned but not yet recorded in the accounts.
Aged creditors
A list of the suppliers that your business owes money to and how old that debt is.
Aged debtors report
A report of the customers who owe you money and how old their debt is.
Asset
An item owned by your company that has a monetary value. E.g. stock, cash, property and money owed by debtors.
Balance sheet
A list of all assets, liabilities and equity of the company, used to calculate the business’ net worth.
Benefit in kind
Also called fringe benefits, these are items received by employees or directors from the company, but which aren’t included in their salary. E.g. company car.
Business
A company or organisation that trades in services and/or goods.
Capital
Wealth owned by a business or an individual that is available for reinvestment into the company.
Capital allowances
A fixed asset which is allowed by the HMRC to be taken off your company profit before the application of tax. E.g. plant machinery.
Cashflow
The amount of cash that’s been transferred in and out of your business.
CEST
Check Employee Status for Tax (CEST) is a tool used by the government to check if a contractor is inside or outside the IR35 rules.
Close company
This term defines a limited company with up to five participators or shareholders, who are also company directors.
Confirmation statement
All UK limited companies are required to submit a yearly update to Companies House to confirm their company information.
Contract of services
A contractor with a ‘contract of services’ will generally be recognised as an employee. It includes details of their set working location and hours.
Contract for services
A contractor with a ‘contract for services’ will generally be recognised as self-employed. It includes details of their specific services to be delivered on a particular project.
Contractor
Is a worker who provides services to a client for a set fee and in a set period of time.
Corporation tax
This is tax on your company profits which must be paid to the HMRC within nine months of your company’s accounting period.
Cost of sales
A purchase made in order for a sale to have taken place. For example, for a bakery this would be bread.
Credit note
This is a document sent to the buyer from the seller stating that a certain amount has been credited to the buyer’s account. This can be used to document that a refund has taken place.
Creditor
Another company or person who is owed money.
Current assets
These are assets that you expect to convert into money within the short-term. For example, amounts that are owed by customers for goods or services.
Current liabilities
Amounts owed by your company to other people which have to be paid within a year.e…
Be sure to check back for more!
You can contact us and we’ll help you through the complexities of financial planning and company accounting involved in running your own business.
Written by
Nicola J Sorrell
- Effective Accounting
Founder | Xero Champion | IR35 Expert
Tagged as: Accounting Jargon
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