Your Accounting Terms & Phrases Glossary
Here at BCT Accountants, we are proud of our no-jargon approach to accounting. It's our mission to make accounting accessible and flexible to all without compromising on the service provided. This is something we find our clients frequently praising us for as we help them to understand their business finances without scratching their heads.
If you've ever been flummoxed by a conversation with your accountant, this post is for you. Here's our rundown of some of the most common accounting terms and phrases. Let's clear up those muddy waters!
Accounting: The process of keeping financial records and accounts.
Accounting Period: The time in which your business' financial data is tracked. Most businesses do this on a monthly basis.
Accounting Software: Software that does various accounting and bookkeeping tasks.
Accounts Payable 'AP': Money that is owed by your business to another. This is typically in exchange for goods or services.
Accounts Receivable 'AR': Money that is owed to your business. This is typically provided on credit in exchange for your products or services.
Asset: A resource that your business owns or control such as buildings, equipment, vehicles, land and furniture.
Accrual: Money that has been earned or spent but not yet paid.
Arrears: A payment that is made later than the terms of the arrangement for the goods or services.
Balance Sheet: A statement that reports a snapshot of your businesses finances at a particular time. They are 'balanced' between assets and liabilities.
Bank Reconciliation: The process of comparing your businesses sales and expenses that go through the bank against your bank records.
Cash Flow: The amount of money coming into and out of your business.
Cloud Accounting Software: A type of accounting software that is accessed via the internet meaning you can access them anywhere in the world. Our favourite is Xero.
Expenses: Money spent in order to generate revenue in a business.
Equity: The money invested into a company by its owners.
Fixed Assets: Assets that cannot be easily converted into cash. These are most commonly physical things like buildings or equipment.
Gross Profit: The money a business has after paying for what you've sold to customers. This doesn't include operating expenses.
Invoice: A document sent to a customer for the charge of your services or goods provided featuring all the information about the transaction.
Liabilities: All the debts the company owes.
Margin: The difference between a business' sales and the cost of goods sold.
Markup: The amount in which the cost of a product is increased to reach the sale price.
Net Profit: The money a business keeps after all expenses and taxes are paid.
Operating Profit: The money a business has after paying all expenses but before paying tax.
Overheads: Ongoing business expenses that do not relate directly to creating a product or service.
Payroll: A list of the employees within a company and the amount of money they are to be paid.
Pay As You Earn (PAYE): A system whereby income tax is deducted from an employees salary before they receive it.
Profit & Loss Statement: A document that shows a business' revenue, costs and expenses over a specified period.
Petty Cash: An accessible amount of cash used for expenditure on small items.
Return on Investment (ROI): The ratio between net income and investment, used to measure the effectiveness of an investment.
Revenue: The sum of money received by a business in return for selling goods or services.
Working Capital: The amount of money a business has at its disposal. It is a business' assets less its current liabilities.
Year-End: The end of the financial year.
If you'd like to skip the Googling of different terms after a meeting with your accountant, then we could be a great fit. We're passionate about making accounting easy and accessible for our clients.
If you'd like to chat about how an accountant could best support you and your own circumstances, we recommend booking a free no-obligation consultation call. Give Catherine a call on 01423 431889 or email firstname.lastname@example.org.
Please note all information accurate for the 2021/22 tax year.