Accountancy Jargon Explained

17 August 2020|Related :

At Ryans, we understand that accountancy jargon and complicated terms can be difficult to get your head around, which is why we do our best to keep things as simple as possible for our clients. Unfortunately, sometimes it is unavoidable. 

This is why we’ve compiled a list of accounting terms and what they mean, so you always know what we’re discussing. Use the guide below if you need some guidance:

The A-Z of Accountancy Jargon



Abbreviated Accounts

– Less detailed accounts that small companies can file these with Companies House. They don’t require a profit & loss account which helps to conceal some information that may benefit your competitors.


– Expenditure that has not yet been paid for or invoiced. Examples include electricity charges and financial advice given but not yet billed. 

Accrued Income

– Work you have done but not yet paid for or invoiced. This is also an asset as costs have been incurred, but the income is yet to be acknowledged. 

Aged Creditors Report

– A report of how much you owe suppliers and how long you have owed them for. This can help you to stay in line with their terms and keep them keen to deal with you in the future.

Aged Debtors Report

– A report of how much is owed to your business by your customers. Can also help you to keep track of the credit limit you give to your customers and those who have exceeded it.


– Decrease in value of an intangible asset or the action of paying off debt through routine payments.

Annual Investment Allowance

– Annual investment allowance is a way to claim tax relief on the assets your business buys. Each year the government sets a limit on how much annual investment allowance a business can claim in a year, so if the assets you buy exceed the limit, you won’t be able to claim it on them. The current limit (until Jan 2021) is £1,000,000. (The AIA specifically excludes cars)


– Something the business owns or does that leads to an increase in or maintains funds flowing in. 


– An official inspection of your accounts. A statutory audit is required by fairly large businesses and must be undertaken by a firm of registered auditors. Most small businesses do not require an audit unless they have a turnover greater than £10.2m, have total assets greater than £5.1m or have over 50 employees.



– Business to business. When you sell to or buy from other businesses.


– Business to consumer. When you sell to the general public.

Balance Sheet

– A brief look at a specific point in time of all the assets and liabilities of your business.

Benefit in Kind

– Non-cash items used to reward staff outside of their salary or wage. Often referred to as ‘perks’ or ‘fringe benefits’. They are given a notional cash value which you pay tax on. Examples include company cars and health/life assurance.


– Maintaining a detailed record of the receipts and expenses of your business. 


Capital Allowances

– The depreciation of tax on business expenditure. HMRC don’t trust accountants to use a suitable depreciation policy, therefore they created their own.

Capital Expenditure

– When a company buys assets (e.g. vehicles or printers) expected to last more than 2 years. This is different to revenue expenditure, which includes consumables (eg fuel or ink cartridges).

Capital Gain

– Profit made from the sale of an asset purchased with the intention of being used in the business rather than resold e.g. profit on the sale of office buildings, or the business itself.

Cash Flow

– The amount of money that is transferred into and out of the business. A sale makes a profit or loss as soon as it is made, but the money doesn’t appear in your cash flow until you have been paid.

Companies House

– The UK registrar of companies.

Company Secretary

– The person responsible for the efficient administration of a business.


– The gross profit on each sale, showing the difference between sales price and variable costs for specific products. These contribute towards the fixed costs/overheads.

Corporate Finance

– The finance actor that handles funding sources and investment decisions. E.g. Corporate finance specialists will help you value another business and acquire the money to buy it.

Corporate Recovery

– Another name for an insolvency practitioner. Companies that are struggling financially will ask corporate recovery for their help to save the business. If it is beyond being saved, they will liquidate it.

Corporation Tax Computation

– Explains how figures in the statutory accounts are adjusted for tax purposes to give the figures that go on the corporation tax return.

Corporation Tax Return

HMRC form CT600. Includes key numbers from the computation in a standardised form for HMRC.

Credit Control

– Strategies used by companies to ensure people who owe money pay it. This includes performing credit checks before the sale and limiting the amount of credit you extend to those with poor credit history or after by chasing them with letters and phone calls.


– People who are owed money by the business.



– People who owe the business money. You should use credit controls to make sure you are paid. 

Deferred Income

– When you have been paid before you have done the work or given the service. This is a liability as the sale is acknowledged, but the costs haven’t yet been incurred. 

Deferred Tax

– A complicated accounting principle which represents any time differences between your accounting profit and your tax profit. When the income is more than the estimated tax, it is entered as an asset on the company’s balance sheet. When the income is less than the estimated tax, it is entered as a liability.


– An accounting concept to devalue an asset over time. For example a new printer may cost £300. After a year it may only be worth £240. Depreciation represents this fall.


Limited Companies must have at least one director, controlling the overall running of the company. In small companies there may only be 1 director who also owns all the shares. Large companies often have many directors, both executive (involved in the day to day running of the business) and non-executive (occasionally attend board meetings to provide their input).


– When a business makes a profit, this profit may be divided between the shareholders as dividends (or reinvested into the business). 


– When a company has not traded at all for a year. There is no profit and loss account, and the balance sheet remains the same as it did at the beginning of the period.



– The value of the company ownership via shareholders. This should equate to the net assets.


Fixed Asset

– Asset purchased by a business to be used rather than resold. Usually held for over 1 year. Examples include an office building, equipment such as printers and vehicles.

Fixed Cost

– A cost that doesn’t change regardless of the volume of your sales/purchases. E.g. property rent and rates.



– Generally Accepted Accounting Principles. The rules and standards that dictate how accounts are prepared.


– An intangible asset that represents the value of a business above its identifiable assets. Businesses are typically sold for more than the book value of their net assets.



Her Majesty’s Revenue and Customs. A non-ministerial department of the government that is responsible for collecting taxes, the payment of state support and the administration of other regulatory regimes such as the minimum wage and the issuing of national insurance numbers.



– International Financial Reporting Standards. The international equivalent of UK GAAP.


– When the total value of your liabilities exceeds the total value of your assets, meaning you have negative net assets.

Intangible Fixed Asset

– A non physical asset i.e. you can’t see or touch it but it holds value e.g. a strong brand name, patents held, or goodwill.



– Job Seeker’s Allowance. A benefit for the unemployed who are actively seeking work.



Online accounting software.



– Money or a debt the business owes that leads to funds flowing out of the business. 

Limited Company

– A separate legal entity to its owners.This means the shareholders won’t be personally liable for financial losses made by the business. Many businesses choose to operate via a Limited Company either for the limited liability, or for tax reasons.

Limited Liability

– Shareholders of companies have limited liability. This means (provided they do not act negligently or fraudulently) should the company fail, they are not held personally liable and the most they lose is their share capital. 


– In cases of insolvency when a business is beyond fixing, their assets are all sold off quickly in order to make money to hopefully pay the creditors before closing down the company. In solvent cases, all creditors will be paid, sometimes this is tax motivated or simply to have a professional formally overseeing the closure of the company.



 Making Tax Digital. A scheme by HMRC to fully digitalise the tax system by 2020. Find out more about MTD here.


Net Assets

– The total value if you add up all the assets and decrease the value of all the liabilities. If you’re left with a negative figure, you have net liabilities and the business is insolvent.

Net Book Value

– Most commonly used for fixed assets. The net book value (or carrying value) is the cost, less all depreciation to date. This will often broadly represent market value, though this will not necessarily be the case.

Net Current Assets

– The net value if you sum up all the current assets and deduct the value of all the current liabilities. Can be a more useful tool to decide how easily you can pay your day to day bills.


National Insurance. A payment made by those earning above £9,500 annually towards state benefits such as pensions.


 National Insurance Contributions. This is how much you contribute to National Insurance.


 National Living Wage. The minimum rate that employees over the age of 25 must be paid by their employer.


National Minimum Wage. The minimum rate that employees under the age of 25 must be paid by their employer.


Outsourced Accounting

 Having an external professional accountant (like Ryans) manage your accounts, as opposed to an internal accountant.


– Costs that don’t directly relate to sales. These are typically also fixed costs, so things like rent & rates, accountancy fees, depreciation.



Pay As You Earn. The tax system where an employee’s income tax and National Insurance contributions are deducted from their salary before they are paid.


A fund in which a sum of money is added during an employee’s employment years in order to support them during retirement.


– A product or service you have been invoiced for, but have not yet received the benefit of. Examples include insurance paid up front, or a software licence invoiced in advance. The opposite of: accruals.

Profit & Loss Account

– A summary of all your income and expenditure over a specific time period.


 A document that employers must give to their employees when they leave the company.


A document that employers must give to their employees by 31 May every year for the previous tax year, stating the amount of gross pay and tax that was deducted from their salary.



 Something that must be done four times a year. VAT returns and MTD updates must be done on a quarterly basis.


 Online accounting software.


Registered Office

– The address of the company that Companies House sends official documents to. This should typically be either the main place of work, or their accountant/solicitor’s office.

Retained Profit

– The sum of all profits (after tax) and once dividends are paid out.

Revenue Expenditure

– Purchasing things which are used up in the day to day running of your business (eg fuel or ink cartridges). This is different to capital expenditure, which includes things expected to be used for over a year (eg a van or a printer).



Online accounting software.

Self Assessment Tax Return

– Or personal tax return. If you are self-employed, have other complex income or HMRC request it from you, you’ll need to fill one of these in. It allows HMRC to collect income tax.

Self Employed

 Someone who works for themselves.

Share Capital

Limited Companies will typically have share capital. Those who own the shares own the company. There may be many shareholders all owning a very small percentage of the company each, or one person (or other company) who owns 100%. Shareholders typically have a right to dividends, attend the AGM (annual general meeting), and vote on major decisions involving the company.


Small and Medium-sized Enterprises. Businesses with fewer than 250 employees.


Tax Avoidance

Reducing your tax burden in ways that fully comply with the law. This ranges from ensuring you claim allowances to complex offshore schemes which HMRC constantly try to stop (the latter are often on the edge of the law, so can be disagreement on whether they are tax avoidance or tax evasion).

Tax Compliance

– Assisting a business to meet all of its tax obligations. This involves ensuring their returns are accurate and submitted on time, and that payments are made on time too.

Tax Evasion

Reducing the tax burden in ways that do not comply with the law, therefore making it illegal. This typically involves not declaring all of the business income (“cash deals”) or inventing non-existent expenses. HMRC will crackdown and you will be caught. Don’t risk it.

Tax-Free Childcare

A government initiative set up for working parents. Those eligible are able to open a savings account with a registered provider that will be topped up by 20% by the government. Find out more here

Tax Haven

– A country with very low rates of tax such as the British Virgin Islands. If you still live in the UK and/or your business is run from the UK, you must pay UK tax.

Tax Planning

– Helping a client to legally reduce their tax burden. Many accountants will exaggerate this but are often just saying what they think the client wants to hear. 

Trial Balance

– A bookkeeping worksheet that lists all general ledger codes and their respective balances. Only really required by accountants, but it summarises both the balance sheet and profit & loss into one document.



 Unique Taxpayer Reference. A 10 digit number given to self-employed people when registering their self-assessment or during the set up of a limited company.


Variable Cost

– A cost which changes depending on the volume of sales/purchases.


 Value Added Tax. VAT is a tax paid on almost everything we buy. Once a business has an annual turnover exceeding £85,000, they are required to register for VAT.

VAT Annual Accounting Scheme

 With this scheme, businesses are only required to submit their VAT returns once annually, as opposed to quarterly reports under the regular VAT scheme.

VAT Cash Accounting Scheme

 With this scheme, businesses are only required to report and pay their VAT on sales and purchase invoices that have been paid for.



A new employment status, recognising those working in the ‘gig economy’, making them entitled to some of the benefits that regular employees are.



 Online accounting software

X-Mas Party Tax Relief

 Annual events such as work Christmas parties can qualify as a tax-free benefit so long as the cost per head exceeds no more than £150 and the event is for all employees.


Year End

 The closing period of a company’s account year, falling on the anniversary of the end of the month that the company was incorporated.


Zero Rate

 When goods are zero rated, they are still VATable but the rate charged to a customer must be 0% e.g. books, newspapers, children’s clothing.

If there is anything you are still unsure about, please don’t hesitate to get in touch with us, .

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