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! 
 
 
Debtor 
Another company or person who owes you money. 
 
Depreciation 
This term is used to describe a tangible asset, such as a printer, which will devalue over a length of time. 
 
Director 
Person who runs a limited company and who often owns shares in said company. 
 
Director’s loan account 
This is any money that you take from your company that isn’t salary, expenses repayment and dividends, or it’s money you previously paid into or loaned the company. 
Director’s withdrawals 
The amount of money owed to a company director, including expenses, salary and dividend payments. 
 
Disguised employment/employee 
When a contractor performs an employee style job but doesn’t pay the Income Tax or National Insurance Contributions that a normal employee pays. The introduction of the IR35 rules by the government are designed to put a stop to this. 
 
Dividend 
These are payments taken from the company profits, after Corporation tax is deducted, to the shareholders. 
 
Employer’s liability insurance 
An insurance policy that’s in place to cover any costs that may arise from claims made by your employees while they’re at work. 
 
Employment language 
Terms used that clearly indicate that you are an employee, such as ‘hours of work’. This style of language can be used when identifying if your contract is inside or outside of IR35. 
 
Exclusive service 
When a contractor enters into an exclusive service agreement, they must not take on any other clients. 
 
First accounting year end date 
This is the end date of your company’s first accounting year. This is usually one year after your limited company was formed. 
 
Financial forecast 
An estimation of your business’ future financial outcomes. 
 
Fixed asset 
An item that brings in an economic value into the business for a longer period of one year. For example, buildings, land, machinery, vehicles, etc. 
 
Franchise 
This is when a business licence is given by another company that enables you to market their own products or services. 
 
GDPR 
This stands for General Data Protection Regulation, which came in effect across the EU in 2018. These rules are in place to help safeguard personal data online. 
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 
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