The Book-keeping Glossary
Accountant – generally a person holding a university degree and a professional accountancy qualification obtained from a governing body e.g. ACCA
Accrual – a liability resulting from an expense for which no invoice has yet been received
Assets – anything a business owns which has a cash value. Assets can be either tangible or intangible, fixed or current
Balance sheet - a snapshot of a business’s assets and liabilities at a point in time
Book-keeper – a person who provides a financial support and administrative role to owners of small businesses
Book-keeping - the recording of all financial transactions undertaken by a business (or an individual).
Brackets (X) – how negative numbers are shown in the financial statements e.g.
-100 would be shown as (100)
Capital – the net worth of a business. This is the amount by which a business’s assets exceed its liabilities. The balance is the owner’s equity in the business
Cost of sales - are direct costs, directly applicable to selling a product or service e.g. in a plumbing business a cost of sale would be materials such as pipes and washers
Credit – an entry which results in either an increase in liabilities or net worth, or a decrease in assets
Current Assets - are assets the business is going to have for less than one year e.g. stock and debtors
Current Liabilities - amounts a business owes to other parties, which need to be repaid within one year of the business’s year end date
Debit – an entry which results in either an increase in assets or a decrease in liabilities or net worth
Depreciation - an adjustment to reflect the reduction in the balance sheet value of a business asset
Drawings – business owner’s monetary withdrawals from a business
Equity – an owner’s interest in the business
Expenses - any cost of doing business resulting from revenue generating business activities
Fixed Asset – an asset the business is going to keep for more than one year e.g. a drill, new computer etc
Income – see revenue
.............Book-keeping Terms Explained in Plain English!
Intangible Assets – assets you can’t touch e.g. a patent or trademark
Journal - a written description of what accounts in the nominal ledger are debited and credited
Liability - something which someone else has a claim to e.g. a house which is mortgaged. The mortgage is a liability. Liabilities can be either current or long term liabilities
Limited Company - shareholders own the business by acquiring a share of the companies share capital. The shareholders appoint directors to run the company on their behalf
Long term liability - amount a business owes to another party, which needs to be repaid after more than one year
Loss – when expenditure is greater than revenue
Partnership – this is the same as a sole trader, except there will be more than one owner. Some of your clients will be partnerships
Prepayment – a payment which is made before the corresponding accounting period for the expense
Profit – when revenue is greater than expenditure
Profit and Loss Account – a statement summarising a businesses revenues and expenses for a period
Revenue – is the money a business receives from its customers for carrying out it’s business activity. Revenue is also known as sales or income
Sales – see revenue
Shareholder - is a person who owns a share in a limited company
Sole trader - the owner is the business, and therefore unlike with a Limited Company, there is no limited liability. The owner is liable personally for all debts of the business. Most of your clients will be sole traders
Tangible Assets – assets you can touch e.g. a computer
Timing difference –the time delay in a bank receipt or bank payment clearing the bank
Trading Account – this is the first statement on a Trading Profit and Loss account, and shows revenue less cost of sales
Trial Balance – a summary of all the 'T' account balances (nominal ledger accounts) at a point in time
