| Account |
A section in the ledger devoted to a single aspect of the business (eg. Stationery, Postage) |
| Accounting equation |
This formula expresses the fundamental logic behind the Balance Sheet. Assets = Liabilities + Equity. |
| Accounts Payable |
See Purchase Ledger. |
| Accounts Receivable |
See Sales Ledger. |
| Accruals |
An accrual is a sum included in the accounts to cover income or spending which belongs to the period covered by the accounts, but which was unpaid at the accounting date. |
| Amortization |
Depreciation of an (usually) intangible asset. |
| Arrears |
Bills which are overdue for payment. If you have not paid the last three months of rent, you would be three months in arrears. |
| Audit |
The process of checking the entries in the books to make sure that they agree with the original sales & purchase invoices and other prime documents. |
| Balance Sheet |
The summary of all the assets, liabilities and equity of a business. It is usually at the end of each financial year. |
| Bought Ledger |
See Purchase Ledger |
| Budget |
A plan expressed in terms of money, relating to a period of time, which is usually relates to a year, but in medium term planning, it can refer to a number of years. Click here to article on budgeting. |
| Capital |
The amount of money that the owners have put into the business. Also, capital expenditure, relates to expenditure fixed assets (such as buildings, machinery) used in the business. |
| Capital Allowances |
The tax equivalent of depreciation. The depreciation in the accounts is added back and instead, an allowance (which is usually a percentage, and depends on the asset) is claimable against any profits, before computing the tax due. |
| Capital Gains Tax |
The tax liability which may arise if a fixed asset is sold at a profit. The computation can be complex since there are various Capital gains allowances and adjustments for inflation which depends on the type of asset and its age, amongst other factors. |
| Cash Book |
A journal where a business’s cash transactions (and sometimes bank transactions) are recorded. |
| Cash Flow |
A report showing the actual flow of money in and out of the business. It is possible to be profitable but still have cash flow problems |
| CIMA – Chartered Insitute of Management Accountants |
Professional Accountancy body for accountants. Members focus on accounting for business. Therefore, members have usually trained and qualified whilst working in an organisation’s finance department. |
| Companies House (UK only) |
The government department responsible for collecting and storing information about limited companies. A limited company must supply file its final accounts with Companies annually, or face penalties. |
| Committee of Accountancy Bodies (CCAB) |
CCAB provides a forum in which matters affecting the profession as a whole can be discussed and co-ordinated a |
| Corporation Tax (CT – UK only) |
The tax paid by a limited company on its profits. In April 1999, Advanced Corporation Tax was abolished and large companies now pay their CT in instalments. |
| Cost accounting |
An area of management accounting which deals with establishing the costs of running a business. |
| Credit Control |
The managing of customer debt. The credit control function is concerned with credit checking of potential customers, “chasing payment” of a business’s sales invoices, by letter or telephone. Sometimes a customer is put on “stop”, which means no further |
| Credit Note |
The opposite of a sales invoice, which wholly or partly cancels a sales invoice. |
| Creditors |
Suppliers to whom the business owes money |
| Customer Account Profitability Analysis |
Analysis of the financial impact of the different ways in which customers are serviced. (Identifying which customers are more profitable) |
