Account Glossary

Glossary

Account

Record of a business transaction. When you buy something on credit, the company you are dealing with will set up an "account". This means that they set up a record of what you buy and what you pay. You should do the same thing with any customers to whom you give credit.

Accounts

A generic term for the financial documents that companies in the UK are required to file each year. Most companies filing will include a Profit & Loss account, a Balance Sheet, a Director's Report and Auditor's Statement.

Adding Value

Providing something extra, over and above your competitors, which makes your proposition more attractive then theirs e.g. personal service.

Asset

Anything of worth that is owned by the business. The assets of a business are money in the bank, accounts receivable, securities held in the name of the business, equipment, fixtures, property or buildings, merchandise for sale or being made, supplies and all things of value that the business owns.

Audit

A process carried out by an accountant (auditor) on all limited companies each year to check that the financial records are correct. The auditor cannot be the company's own accountant. Sole traders and partnerships do not need to have their accounts audited.

Balance Sheet

A statement of the assets and liabilities of the business at any given time.

Benchmarking

A method used to compare the relative performance ranges of different businesses. It is an effective way of identifying areas for business improvement.

Best Practice

Best performance of a function or process or methods that lead to exceptional performance.

Brainstorming

A technique of solving problems in which members of a group put forward ideas to resolve the issues raised.

Break Even

Break-even point represents the volume of sales at which total revenue equals total costs.

Budget

A plan, usually expressed in monetary terms, which projects the operation of a business over a period of time.

Business Angel

An individual investing in businesses, especially start-up businesses.

Business Plan

A document, which analyses your business activities in detail and predicts the expenditures of the business for at least the coming year. Usually presented to the bank to support a request for a loan and/or overdraft facilities.

Capital

This has several meanings, but usually refers to the amount of money in the business belonging to the proprietors or shareholders.

Capital Expenditure

Money spent on the purchase of an asset.

Cash Book

A daily record of payments and receipts.

Cash Flow

The difference between total cash coming in and going out of a business over a period of time.

Companies

A Company is a type of business structure created and regulated by state law. What sets the company apart from all other types of businesses is that a company is an independent legal entity, separate from the people who own, control and manage it.

Conditions of Payment

The written terms under which one must make payment or could seek payment if it was due to him/her.

Cost of Sales

A term used in a trading account representing the cost of the materials used which, when taken from the sales figures, gives the gross profit.

Cost Plus Pricing

Selling a range of products/services by setting the price on the basis of adding a fixed mark-up to the total costs of production and associated costs.

Credit

The period allowed, or taken, to pay for goods or services.

Credit Account

An agreement made with a trusted customer so that he or she can buy goods or services and pay for them later.

Creditor

A party to whom money is owed by the business.

Current Asset

A cash balance and other assets intended for conversion in cash.

Current Liability

A temporary debt which is capable of being paid off within one year, e.g. creditors, bank overdraft and short term loans.

Debtors

A party who owes money to the business.

Depreciation

A way of measuring the cost of using an asset which decreases in value with time and/or use.

Differentiation

To make one's product/service different from others in the market place.

Direct (variable) Costs

Expenses, such as materials, which vary according to the number of goods produced or services offered.

Drawings

Money taken out of the business by the owner for personal purposes (sole trader & partnership only).

E-Commerce