Glossary
A
Accounts Payable (AP)
Money your business owes to suppliers for goods or services received but not yet paid for.
Accounts Receivable (AR)
Money owed to your business by customers for goods or services delivered but not yet paid for.
Accrual Accounting
A method of accounting that records income and expenses when they are earned or incurred, not when money changes hands.
Annual Accounts
A summary of a company’s financial activity for the year, including profit and loss, balance sheet, and supporting notes.
Asset
Something valuable owned by your business, such as cash, equipment, property, or stock.
B
Balance Sheet
A financial statement showing your business’s assets, liabilities, and equity at a specific point in time.
Bookkeeping
The process of recording financial transactions in your accounts.
Break-Even Point
The level of sales at which your total revenue equals your total costs, meaning you make neither a profit nor a loss.
Business Plan
A formal document outlining your business’s goals, strategies, and financial forecasts.
C
Capital Allowances
Tax relief on certain types of capital expenditure, such as equipment, machinery, or vehicles.
Cash Flow
The movement of money in and out of your business over a set period of time.
Corporation Tax
A tax on the profits of UK limited companies.
Cost of Goods Sold (COGS)
The total cost of producing or buying the goods your business sells.
D
Depreciation
The gradual reduction in the value of an asset over time due to wear and tear or obsolescence.
Dividend
A payment made to shareholders from a company’s profits.
E
Equity
The value of ownership in a business, calculated as assets minus liabilities.
Expense
Costs incurred in running a business, such as rent, utilities, or wages.
F
Fixed Assets
Long-term resources such as buildings, machinery, and equipment used in your business operations.
Forecasting
Predicting future financial performance based on past trends, market conditions, and planned activities.
G
Gross Profit
Sales revenue minus the cost of goods sold.
Gross Salary
An employee’s total pay before tax, National Insurance, and other deductions.
I
Income Statement
Also called a profit and loss statement, it shows your business’s revenues, expenses, and profits over a specific period.
Inheritance Tax (IHT)
A tax on the estate (property, money, possessions) of someone who has died.
Invoice
A document requesting payment for goods or services provided.
L
Liability
A financial obligation or debt owed by a business, such as loans or unpaid bills.
Limited Company
A business structure where the owners’ liability is limited to their investment in the company.
M
Management Accounts
Regular financial reports used by business owners to make informed decisions.
Margin
The difference between the selling price of a product or service and its cost.
P
PAYE (Pay As You Earn)
The UK system for collecting income tax and National Insurance from employees’ wages.
Payroll
The process of calculating and distributing wages to employees, and handling tax and National Insurance contributions.
Profit Margin
A measure of profitability calculated as profit divided by revenue, shown as a percentage.
R
Revenue
The total income generated by a business from its operations.
Retained Earnings
Profits kept in the business rather than distributed to shareholders.
T
Tax Compliance
Ensuring all tax obligations are met in full and on time.
Turnover
The total sales generated by a business during a specific period.
V
Value Added Tax (VAT)
A consumption tax charged on most goods and services in the UK.
Variable Costs
Costs that change in proportion to the level of production or sales.
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