But just in case, we thought it would be useful to decode some of the industry jargon you you might see from time to time. So here’s our very own glossary for you to refer to whenever you need it.
Making sense of the definitions
An account is a record of the financial transactions that take place within your business. What comes in, what goes out, it’s all logged on your accounts.
Assets are something valuable that your business owns, for example property (like an office), cars or work computers. Your assets are one of the things that will be counted as part of your overall business capital.
This is a statement of the assets, liabilities and capital of a business at the end of the business year. It will show the balance of income and expenditure over the course of the past 12 months.
Your budget is what you use to give an estimate of money in and money out of the business over a set period of time. Budgets are also useful when it comes to forecasting the financial future of your business and allocating resources to where they’re needed.
Money or other assets owned by the company. Business capital constitutes everything your business has.
The amount of cash coming into – and out of – a business. Cash ‘inflow’ includes what the business receives from the sale of goods and services. Meanwhile, cash ‘outflow’ refers to payments a business makes to its suppliers, people, tax authorities and other similar expenses. It’s really important to keep a close track of your cashflow so that you know exactly how much you’ve got in the bank at any one time. The last thing you need is to miss meeting payments.
This is a record of money taken out of a bank account. If your account is in debit at the end of the month, that means more money had been spent than was in the account at that time.
Here, we’re talking about the money your business spends at any given time. Knowing how much you’re spending is important, and will inform any budgeting that you do.
If an account is frozen, that means no debit transactions can be made. A bank account can be frozen for any number of reasons. For example if fraudulent activity is suspected.
The total amount of money made by the company, without anything else being taken into account (e.g expenses and outgoings).
Money the business receives regularly, or as a one off.
We all receive invoices at one time or another, usually asking us to make payment for a product or service that’s been provided. Basically, an invoice is a request for payment from a company to a customer.
Something your company is responsible for in monetary terms. Usually, a liability is talking about an amount of money a business owes.
The amount of money made minus all necessary deductions including sales allowances, sales discounts and sales returns. Ultimately, it’s your gross profit, minus your liabilities.
Overheads are the amount of money spent by a company that’s not directly related to the product or service they provide. For example, marketing or administrative processes.
It simply means per person. This is a good example of industry jargon!
Money taken off the cost of a product. This could be a discount for customer loyalty, or a widespread reduction of the service prices.
A refund given to a customer if they return the product originally bought from the company, or if clients are unhappy with the service that’s been provided.
Transactions happen when something is bought, sold or invoiced in the course of your business. In business terms, a transaction is always measured in monetary terms.
The amount of money a business makes in sales during a particular period of time. Your turnover will affect whether or not you’ll need to become VAT registered.
Do you need some more information?
These are just some of the common accounts and bookkeeping terms you might hear. However, if you’re still unsure about any of these definitions, or there are some more terms you’re struggling to understand, Numero can help. Not only can we manage your accounts accurately and efficiently, but we also provide training for those clients who want to get to know their accounting systems better.
So, if you’re interested in working with us, get in touch today, and let’s see what we can do to make your accounts management smoother.