Jonathan Anderson
As cloud fanatics, we want accounting to be as accessible as possible. That is why we have eliminated jargon and compiled a handy list of common accounting terms for your reference.
Arrears
Bills that are overdue. For example, rent that is two months late is considered two months in arrears.
Audit
The process of reviewing financial records to verify their accuracy and compliance.
Capital
Money that is invested by business owners or an organisation to acquire assets and begin operation.
Cash Flow
The movement of money in and out of a company throughout a specific accounting period.
Closing the Books
A term that is used to describe the final entry of balancing income and expense accounts at the end of the financial year.
Consolidation
Combining assets, liabilities, equity, and operating accounts of two or more entities into one financial statement.
Dividend
The distribution of cooperate profits and retained earnings to eligible shareholders.
Equity
The owners’ stake in the company, which is the difference between liabilities and assets on a balance sheet.
Forecast
An estimate of the future finances of a company based on current data and past performance.
Gross Margin
A profitability ratio that compares the cost of a product or service to its selling price. For example, if a product is sold for £100, but costs the company £70 to manufacture, the gross margin would be 30%.
Her Majesty’s Revenue and Customs (HMRC)
The tax authority for the UK government.
Incorporation
The legal formation of a new organisation.
Key Performance Indicators (KPIs)
A quantified measurement used to gauge the overall performance of a business.
Ledger
A financial record that stores bookkeeping entries to keep track of business transactions.
Liabilities
Debts or financial obligations that are owed from one entity to another for money, goods, or services.
Merger
When two or more organisations merge into a single entity, sharing assets and liabilities.
Net profit
The financial status of a company after deducting all operating, interest and tax expenses over a given period of time.
Overheads
Ongoing business expenses such as salary and rent. Overheads are not associated with production or sales.
Pay-As-You-Earn (PAYE)
An income tax system where employee taxes and National Insurance (NI) contributions are deducted from salary prior to payment.
Petty Cash
A small sum of money that is on hand to pay expenses that are too small to merit another form of payment.
Return on Investment (ROI)
A profitability ratio that is most frequently calculated by dividing net profit with the total cost of investment.
Revenue
The income of a business generated by the sale of goods or services.
Self-Assessment
A standard tax return form that requires self-employed individuals in the UK to send a report of annual earnings to HMRC.
Taxation
The process of levying or imposing a tax by the government against a person or business.
Valuation
The act of valuing a company’s assets and liabilities for the purposes of financial reporting.
Variance
The difference between the estimated cost and the actual amount incurred.
This is just the surface of accounting. If you want to dive deeper into the pool of finance, our expert advisors are here to help you fulfil obligations and achieve your wildest dreams.