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Jargon Buster

We know that sometimes professionals use certain language, abbreviations or acronyms that aren’t always understood by users.

In this weeks blog post, we’re doing a Jargon Buster to help clarify what some of the common accountancy terms mean and why we use them.

In doing this we hope to help you understand when your accountants (hopefully us) blurb out words you have never heard when trying to ‘explain’ things!

Let’s start with ‘What does Jargon even mean?’…

Jargon means (from Google.com): special words or expressions used by a profession or group that are difficult for others to understand.

So hopefully now you know what this blog post is regarding, let’s crack on with some real terms and phrases used by professional financial accountants.

Jargon Buster:

Assets: An asset refers to any property, item or debtors with cash value that is owned by or due to the business.

Audit: The process of checking entries in the books to ensure they match up with the original purchase and sale invoices.

Balance Sheet (BS): A summary of a company’s financial status prepared at the end of each financial year that includes assets, liabilities and equities.

Burn Rate: The rate at which a company spends its money.

Capital: The amount of money invested into a business.

Cash Flow (CF): The amount of money going in and out of a business.

Corporation Tax (CT): A limited company must pay this on its profits. This is calculated yearly and the rate paid depends on the relevant rate for that tax year.

Dividends: The distribution of profit to shareholders from a limited company.

Equity: How much value the business has to the owner or shareholders.

Final Accounts (FA): The submitted or filed accounts of a business which must be signed.

Gross Margin: The difference in price between the cost of a product/service and the selling price of the product/service, this is usually shown as percentage change.

Growth and Acquisition: Looks at how much a company can expand. ‘Growth’ references expanding through normal operations whilst ‘acquisition’ is about expanding by purchasing other companies.

Management Accounts: A draft set of financial statements, taken at a point in time and reporting for a specified period. Usually reported to management personnel on a monthly or quarterly basis to assist management with up-to-date progress and reporting.

Pay As You Earn (PAYE): A PAYE employee is someone paid via a payroll system on a regular basis.

Revenue: Total of sales and other taxable incomes, before expenses.

Her Majesties Revenue and Customs (HMRC): A government department that is responsible for collecting; Income Tax, Corporation Tax, PAYE and VAT.

Shareholders: The owners of a limited company or corporation. These can be in forms such as; individuals, limited companies and partnerships.

Turnover: A business’ income over a certain period of time (usually a year).

VAT: Value Added Tax is a tax added onto the price of goods. Registration is voluntary up to a certain threshold (depending on turnover and the threshold set by HMRC). Some business may be in industries which mean they cannot register for VAT.

If you have any questions or would like to discuss anything with us please do contact us.

Finlay Everington