We decided to write a short blog post on accounting jargon to help clients better understand some of the main terms and words that are often referred to by accountants. It can sometimes appear a little daunting when an accountant talks to a client in accountancy speak and a lot of terms are not so widely used and understood. We hope that you enjoy reading the following and that this post helps to demystify the lingo for the readers of our blog.
Here are some of the main terms that a small business owner is likely to hear their accountant use and we have added a plain English explanation alongside each term.
1. CT600 = Your company tax return or corporation tax return.
2. iXBRL = A machine (or computer) readable format used by HMRC. Your accounts must be submitted in this format but any good accountant can supply accounts in this format with ease.
3. Annual Return = a short return submitted annually to Companies House, mainly containing details on shares issued and shareholders.
4. Abbreviated Accounts = the balance sheet only (excludes profit and loss) with a small number of notes. The accounts are submitted to Companies House in this format.
5. UTR = Unique Taxpayer Reference or a code issued by HMRC to identify you or your company.
6. Accruals Accounting = shifting income or expenditure into the right accounting period. E.g. income recognised when you completed the work or made the sale rather than when you received the cash.
7. Allowable expenses = expenses that reduce the tax you pay.
8. Annual Accounts = Financial year-end accounts, mainly comprising the profit and loss account and balance sheet as well as notes to the accounts.
9. Creditor = someone the company owes money to. This could be you as company director.
10. Debtor = someone who owes money to the company.
11. Depreciation = cost of equipment spread over useful life. E.g. cost of office equipment spread over five years.
12. Income = mainly money from clients for services provided or money received from the sale of goods. Can be other business income such as bank interest.
13. Expenditure = money paid out associated with running the business.
14. Financial year = the 12 months the company accounts are prepared across.
15. Liabilities = company debts.
16. Turnover = value of goods or services sold. Usually expressed as an annual total.
17. Trial Balance = a list of closing balances used by an accountant to prepare the annual accounts.
We always aim to explain everything to all of our clients in a language that everyone understands so that you know exactly what to expect from us and exactly what we need from you to complete your accounting work.