| Net of Tax |
The price less any tax. |
| Net profit |
The value of sales less the cost of sales. |
| Overheads |
The costs involved in running a business which cannot be directly attributed to a particular product or service. Examples may include business rates and telephone costs. |
| P.A.Y.E (UK only) |
Pay as you earn. The system of income tax where an employee’s tax and national insurance contributions are deducted from the gross pay by the employer before being paid. |
| Payment in Advance |
A charge taken into account when preparing the financial statements, which are for, benefits to be received in a period after the accounting date. |
| Performance Indicators |
Method of measuring an organisations performance with the purpose of external comparison to other organisations or for internal use as a way of monitoring improvement, efficiency or similar. For example, businesses may measure their Earnings per Share (EP |
| Petty Cash |
A small amount of cash held by the business to pay for incidental items where a cheque or credit payment is not appropriate. |
| Petty Cash Voucher |
A document used to record an item of petty cash expenditure, where an original receipt was not obtained. |
| Profit and Loss Account |
A summary of revenue and expense accounts which shows the current profit or loss of a business for a particular accounting period, (usually prepared at the end of the financial year) |
| Profit margin |
The percentage difference between the cost of a product and the price it is sold at. It is also referred to as the “mark-up”. |
| Pro-forma invoice |
An invoice that requires payment in advance of the goods or services being received. |
| Provision |
An amount recorded in the accounts for an expected future liability. A charge taken into account when preparing the financial statements, which are for, benefits to be received in a period after the accounting date. |
| Purchase Ledger |
The account in the nominal ledger which contains the total purchases. The Accounts Payable ledger (sometimes called the “purchase ledger” or “bought ledger”, holds the detail of payments to the business’s suppliers. To see how this fits into the bookkee |
| Raw Materials |
The materials bought in by a manufacturing business in order to make its products. |
| Rebate |
The amount of refund you may get if you have paid for a service and then cancelled it. |
| Reconciling |
The process of checking entries made in the accounts with a statement from a third party (e.g. a bank statement or a supplier statement). It is also one of the processes an auditor would carry out. |
| Reserve accounts |
Reserve accounts usually reserve or apportion some of a business’s capital against future purchases or liabilities (such as the replacement of capital equipment or estimates of bad debts). Some types of reserve can only be spent if certain conditions are |
| Retained earnings |
The amount of money left in the business after its owner(s) have taken their share of the profits. |
| Retainer |
A sum of money paid in order to ensure the availability of a person’s or company’s services. |
| Revenue |
Sales and other taxable income. |
| Sales |
Income from sales of goods or services. See also Revenue |
| Sales Ledger |
The account in the nominal ledger which contains the total sales. The Accounts Receivable ledger (also called the “sales ledger”, holds the detail of payments to the business’s customers. |
| Self Assessment (UK only) |
This came into force in the 1996/1997 tax year. If you are self employed or receive and untaxed income, you need to register with the Inland Revenue. You are responsible for calculating your own income tax and for filing your tax return by the proper da |
| Shareholders |
The owners of a limited company. |
| SME |
Small and Medium Enterprises. |
| Sole trader |
Self-employed owner of a business where the owner is legally liable for all the debts of the business (i.e., the business is not a limited company) |
| Stock Taking |
Physically checking the total quantity & value of the stock held by a business. This includes raw materials, work-in-progress and finished goods (where applicable). |
| Tangible assets |
Physical Assets of a business. |
| Trading account |
An account which shows the gross profit or loss of a manufacturing or retail business, i.e. sales less the cost of sales. |
| Trial Balance |
A statement pulling together all the balances in the accounts, usually prior to preparing the full accounts. |
| Turnover |
Sales. |
| Value Added Tax (VAT) |
An indirect tax on the final consumer. VAT is increases the price of goods. The standard rate is 17.5%. VAT registered businesses have to account for their input (VAT paid on supplies) and output (VAT) charged on sales. The difference is paid over. |
| Work in Progress |
The value of partly finished goods manufactured by the business. |
| Write-off |
Depreciating an asset to zero value in the accounts. Also, writing off a bad debt (non collectable amount owing to the business) to zero. |
| Zero Based Budget (ZBB) |
Starting a budget off from zero and justifying every cost. |
