Accountants in North Wales
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Do you sometimes get baffled by Accountants jargon? You are not alone…
We have put together this glossary of accounting terms along with a brief description to help you understand more about these terms that we often come across.
Acid Test – The ratio of current assets, excluding stock, compared to the current liabilities.
Amortization – Another term used by accountants for depreciation. This term is commonly used for the depreciation of a capital cost.
Accruals – Expenses that have been consumed or enjoyed but have not been paid for by the accounting date.
Bad Debts – These are debts that are formerly known as irrecoverable. They are then included as a loss in the company’s profit and loss account as an expense.
Book Value – This is the amount that the asset appears on the accounting records and the balance sheet. Other commonly used terms with the same meaning are written down value, net book value and carrying value.
Break Even Point – The point where the company makes neither profit nor a loss, this where the company’s total revenue equals the company’s total costs.
Capital Expenditure – The spending on fixed assets.
Cash Flow – This term is used when discussing the cash coming in to a business alongside the cash going out of a business in a certain time period. This is usually represented in a cash flow forecast spreadsheet.
Conversion Cost – The cost of converting a product or service to its current location or condition.
Debenture – A term used for a document that creates or represents a debt. It is very commonly used for the debt itself.
Debtors – This is a term used for the members who owe money towards someone they borrowed it from.
Dividend – A distribution of earnings to its shareholders by the company in which they own shares.
Earnings – A term used commonly for the profit, particularly used for the profit of a company.
Expense – A cost that will be listed within a company’s profit and loss accounts.
Exposure Draft – A document issue based on a specific accounting topic which has been put up for discussion.
Fixed Assets – Assets within a business that have a useful life extending over more than one year. These are normally specified and recognised within a cash flow forecast.
Fixed Cost – A fixed cost is the amount of money a company or individual would pay for a product or service. This cost doesn’t change even if the other costs in the cash flow do.
Fungible Assets – These are assets that are impossible to tell apart from each other.
Gearing – This term is also known as leverage. It is the relationship between debt and equity in the financial structure of a company.
Goodwill – This is an intangible asset which appears on a balance sheet of some businesses. The asset is valued at, or below, the difference between the price paid for the whole business and the fair value of the net assets acquired.
Gross – Gross usually means the amount of something before any deductions have been applied to it. It is normally used within terms such as gross profit.
Historical Cost – The accounting convention where the goods, services and resources are recorded at the cost.
Hurdle – This is a criterion that a proposed capital investment has to pass before it can be accepted and applied.
Indirect Costs – This term is used for costs that cannot be traced to particular products are services that are bought within the company.
Insolvency – This is a term used for the position a debtor is in when they cannot pay off a debt they owe when the due date falls.
Inventory – This is a detailed list of everything used by an accountant. Another word used in this term is stock.
Key Factor – A factor of production that is in limited supply therefore can constrain production.
Leverage – Another word used for gearing. It is the relationship between debt and equity in the financial structure of a company.
Liquidity – The ease in which funds can be raised by the sale of company assets.
Listed Companies – This is a name that is used to call companies that list and sell their shares on the stock exchange.
Marginal Cost – This is a term used for the additional cost incurred by the production of one extra unit.
Mark Up – This is when the gross profit is expressed as a percentage of the costs of goods sold.
Money Measurement – This is the term used when it is required that all assets, liabilities, revenues and expenses to be expressed in cash terms.
Net – This term is normally used for a specified amount after all deductions to the overall total have been made.
Net Book Value – This is the valuation on the balance sheet of an asset. It can also be known as the carrying value or the written down value.
Nominal Value – This is a term used for the face value of a debenture or share as stated in the original documents.
Objectivity – This is the convention of using reliable and verifiable facts rather than using estimates.
Ordinary Shares – This is the equity capital of a company.
Overheads – The term overheads is commonly used as a name for an indirect cost.
Price Earnings Ratio – This is a ratio that investors’ use which is calculated as Share divided by earnings per share.
Prime Cost – This is the term used for the direct costs of production.
Pro Rata – This term is normally used instead of the term “in proportion to.”
Quick Ratio – This is also known as the acid test ratio. It is calculated as current assets (except stock) divided by current liabilities.
Quoted Company – This term has the same meaning as a listed company, a company whose shares are traded on the stock exchange.
Realisable Value – This is a term used for the amount that an asset within a company can be sold for.
Realisation – This is the term used when selling an asset and it turns it into company cash.
Redemption – This is the term used when shares, debentures and loans are repaid.
Salvage Value – This is the amount that is believed to be obtainable after selling an asset that is at the end of its useful life.
Secured Liabilities – This is the term used for describing a liability that is secured by a fixed or floating charge or by any other operation of law.
Securities – These are financial assets such as shares, debentures and loan stocks.
Tariff – This is a term usually used for the tax of a company’s imports. It may sometimes refer to the rate of tax.
Tax – This is a charge against a legal entity’s person, property or activity. This money then goes towards the support of the government.
Time Draft – A draft that matures a certain number of days after acceptance.
Under Budgeted – This term is used when a budget of a company or individual is not enough to cover the actual amount that is need for the product/service.
Unexpired – This is a term used for the opposite of expired. It is when something is given an amount of time and this amount of time has not yet run out.
Use Tax – This is a term used when tax is placed on storing, using, consuming and sometimes distributing tangible property, sometimes even when providing a tangible service.
Value – This is a term used when defining the amount a product or service is worth.
Value Added Tax – VAT is a consumption tax where taxes are levied every step of the way through manufacturing process.
Variable Costs – A variable cost is the opposite of a fixed cost. Variable costs change throughout development or the lifetime of a company. These can be shown on a cash flow forecast.
Wage – A wage is an amount that is paid towards an employee for the work they do within the company, whether it is paid at an hourly rate or a daily rate. The government issue a minimum wage so all work placements are kept fair.
Warranty – Companies selling a product normally give a warranty to try and back up the fact that the product will last a while. This warranty will allow the customer to have a free repair on the product or possibly even allow them to exchange the good for another one depending on the circumstances.
Work Sheet – This is a document which an accountant uses to gather information to confirm an opinion concerning an account balance or transaction.
X-Inefficiency – This is the term used when there has been failure to minimize costs or maximise returns within a business.
Year End – This term means it is the end of the accounting year, usually a calendar year.
Yelling Markets – This term normally refers to markets where transactions involve the yelling of the prices and quantities during the transaction.
Yield – The yield is a term used for the percentage of the annual return on an investment.
Zero Based Budget – This term is used when the expenses or costs from the prior year are not taken into account when establishing the expense or budgetary levels looking forward.
Zero Coupon Bonds – This term is used for bonds that are priced with a large discount from the original face value.
Zero Rated – Goods on which the buyer does not have to pay VAT although the seller can claim back any tax they have paid on the goods.
