| Debtors |
Customers who own money to the business |
| Depreciation |
The decrease in the value of an asset, to reflect the use and passage of time. It can be calculated on a “straight line” basis (an equal amount over a set number of years) or a reducing balance (a set percentage of the previous year’s balance) The value |
| Dividends |
Payments to the shareholders of a limited company |
| Double-entry book-keeping |
Accepted method of accounting for transactions. Each transaction is recorded as a debit and credit, to show where it came from and where it went, so that the system is self balancing. |
| Drawings |
Money taken out of a business by its owner(s) for personal use. |
| Expenses |
The cost of goods or services directly related to the running of the business. It excludes capital items (such as machinery, buildings and so on) |
| Fixed Assets |
Assets (such as buildings, machinery) which are used in the business but not consumed during the day to day running of the business fixed assets. They are depreciated over a number of accounting periods (the length of time depending on the nature of the |
| Gross loss |
The net balance of the trading account (if it has a debit balance) |
| Gross margin |
The difference between the selling price and the cost of production. It is normally expressed as a percentage. |
| Gross profit |
The net balance of the trading account (if it has a credit balance) |
| ICAEW – Institute of Chartered Accountants England & Wales |
Professional Accountancy body for accountants. Members have usually, although not exclusively, qualified by working under a training contract in public practice. Normally qualified for audit. |
| Imprest System |
A method for controlling petty cash. A fixed sum (the imprest) of cash is put in the petty cash box. As it is spent, the receipts (or petty cash vouchers) are collected. When this is almost all spent, it is topped back up to the imprest amount. At any |
| Intangible assets |
Non-physical assets, such as a loan or endowment policy |
| Invoice |
A prime document, either a sales invoiced issued by the business or a purchase invoice received by the business. If a purchase invoice is lost, it is usual to request a copy invoice. It is bad practice to pay on a statement. |
| Liabilities |
Money that the business owes to its suppliers, bank and other debtors. It normally consists of all the accounts on the right hand side of a (horizontal) balance sheet. |
| Long term liabilities |
Normally these refer to long term loans; debts which last more than one year. |
| Management accounting |
Accounts and reports which are tailor made for the use of the managers and directors of a business (in any form they see fit – there are no rules) as opposed to financial accounts which are prepared for the Inland Revenue and any other parties not directly concerned with the running of the business. |
| Matching principle |
This is a fundamental accounting convention. Basically, for a given accounting period, a matching of the sales and the expenses incurred to achieve those sales. (the timing of the when the cash is actually received or paid over is ignored) |
