- Accounting glossary
Accounting and bookkeeping all entail some amount of 'jargon' and while most of it should be explained to you by the accountant you're working with - it can be helpful to understand some of the terminology. Below we have listed some of the common terms so you can familiarise yourself.
If you spot something we've missed, please feel free to contact us.
Abridged accounts - Accounts documenting financial records for a full financial period but omit detailed financial information.
Accounting Reference Period - Defines the financial year.
Accounting Reference Date - The end date of the financial year.
Accounting Regulatory Committee - Approves via a set of EU standards.
Arbitration - When an objective third party is used to settle disputes (such as between partners).
Benchmarking - The act of comparing something to that of something of a similar standard (in relation to business valuation).
Capital - A sub-category of equity - capital doesn't take into account profits. Whereas equity = capital + reserves, capital is simply the accumulated value of assets, without reserves.
Capital Allowance - A form of tax allowance that allows companies to claim back the costs of depreciation on certain assets.
Civic duty - The standard obligation every citizen has to serve certain duties, such as registering to vote, helping those in danger and serving jury duty (term used in relation to personal injury claims/tort law/negligence).
Claimant - Used in reference to forensic accounting, a ‘claimant’ is the individual claiming to be the victim of a crime or breach of civil duty.
Collateral - Something promised as security for loan repayment.
Companies House - Agency of the United Kingdom government with which all UK limited companies (including subsidiary, small and inactive companies) must be registered.
Corporation - An organisation of people authorised to work as a singular entity by law.
Damages - The amount of money deemed appropriate to offset any losses incurred as a result of another individual or organisation’s fault or negligence.
Debenture agreement - An unsecure loan backed by the borrower's own integrity rather than by assets (collateral).
Debt relief orders (DRO) - A form of debt relief for people who own less than £15,000, don’t own property, have no assets worth over £300 and are on a low income.
Defendant - A term used in reference to forensic accounting. A defendant is the individual or organisation accused of an offence in court.
Dividends - The distribution of a portion of a company's earnings to its shareholders.
Drawings - When the business owner or owners withdraw some or all of the money they invested in the business.
Equity (in accounting terms) - The total assets minus total liability (what a business outright owns, without owing).
Expert witness - An individual believed to have a higher than average level of expertise or knowledge, invited to give testimony in court.
Goodwill - A qualitative measure of a company’s value as opposed to quantitative. Goodwill takes into account intangible assets like reputation, trademarks, logos, branding etc.
Horizontal Equity - A form of tax collection that doesn’t take into account people’s wages. Everyone in similar situations must pay the same amount of tax.
Incorporation - Defines the process of forming a company as a legal entity separate from its owners.
Indemnity - Security or protection against financial losses.
Initial Capital - The money invested in starting a business - possibly in the form of partner investments, loans, fund raising etc.
Inflation - When the volume of money increases, the value decreases and pushes general prices up.
Large business - A business with over 250 employees.
Liabilities - Anything a business owes (tax, loans etc.).
Limited company - A company that is organised to give its owners limited liability.
Limited Liability - A type of investment that ensures an investor can never lose more than the original money they invested. This means that the investor is never responsible for any company debts at the event of liquidation.
Litigation support - In reference to forensic accounting, this is the process of preparing a team of lawyers to try a case.
Mediation - An individual who acts as a middleman between two disputing parties with the aim of drawing a mutual agreement. It is the mediator’s job to ensure that all the terms of the agreement are reasonable.
National Insurance (NI) - A form of taxation designed to fund national welfare schemes such as the NHS and state pensions.
Overpayment - A sum of money paid out that is larger than necessary.
Private Sector - Privately owned businesses.
Public Sector - Government owned businesses/organisations.
Quoted company - Any company who offers shares on the Stock Exchange.
Remuneration - Money paid for work or a service, including salary, dividends or bonuses.
RQB - Recognised Qualifying Body.
RSB - Recognised Supervisory Body.
Self-assessment tax return - An annual statement of income and personal circumstances which is assessed by tax authorities to asses liability for tax. Usually completed by individuals who are self-employed sole traders.
Shareholder - An individual or organisation who legally own one or more shares in a public or private corporation.
Share capital - Money injected into the business from the sale of shares.
SME - Small to medium entities (0-49 or 50-249 employees).
Stakeholder - A stakeholder is a group of people or a company that has an interest in a particular corporation, they may or may not be a shareholder.
Stockbroker - A regulated professional who buys and sells stocks, shares and other securities on behalf of their clients. Investors will contact a stockbroker when they want to invest in, or trade stocks.
Sundries - Miscellaneous objects too small or numerous to be specified.
Tort law - A branch of civil law dealing with breaches of civic duty (most commonly negligence).
Trading Profit - A final profit figure that excludes certain items, like one of charges, to get a fairer overview of the company’s long-term financial state.
Turnover - The amount of money taken by a business in a particular period.
Venture Capital - The sum of money provided to start-up businesses by specialist firms in return for a certain percentage of the business’s shares.
VAT - Tax on the amount of value added to a product by its seller.
Vertical Equity - A form of tax collection based on a person’s wage. The more they earn, the higher percentage of tax they are required to pay.