01704 546 000

An A-Z of accounting phrases explained

Accountants are renowned for using incomprehensible jargon and acronyms that add up to sheer bamboozlement for their clients. That’s not the case at Kirkwood Wilson Accountants, we pride ourselves on our plain English approach. So much so, we’ve compiled a handy A-Z of accounting phrases to clear up any confusion.

If you’ve always wondered what on earth your accountant is talking about when they refer to ‘capital gains’ and dividends’ then you needn’t ponder the matter any longer with the following glossary of accounting terms.

Accrual

A cost that has been incurred but hasn’t yet been paid for or invoiced. Examples include professional advice given but not yet billed, or gas and electric charges. It is the opposite of prepayments.

Benefit in Kind

These are non-cash items used to reward staff and are given a notional cash value that you pay tax on. Examples include health assurance and company cars.

Capital Gain

This is profit made on the sale of an asset that was bought with the intention of being used in the business rather than resold. Examples include profits on the sale of the business or office buildings.

Dividends

Shareholders of Limited Companies may be entitled to dividends, which are taxed on the individual at a lower rate than a salary, and are paid out of after tax profits.

Equity

Equity is the funds attributable to the shareholders, which typically includes the share capital and retained profits. It is the bottom half of a balance sheet and should equate to your net assets.

Fixed Asset

An asset bought to be used rather than resold that is held for more than one year. Examples include a company van, computer equipment, or a lease on a property.

Liabilities

The opposite of assets and essentially a debt that the business owes, which will lead to losses.

Net Current Assets

The net value if you add up the current assets and deduct the value of the liabilities. This can be a particularly useful method of determining your ability to pay your regular bills.

Revenue Expenditure

Buying things for the day-to-day running of your business – like printer cartridges. Different to capital expenditure, which includes things expected to be used over a longer period of time – like the printer itself.

Tax Planning

Helping a client to legally reduce their tax burden.

For more information about Kirkwood Wilson Accountant’s accountancy services please contact us on 01704 546000.

Leave a Reply

Your email address will not be published. Required fields are marked *