Widely used accounting terms

The following accounting terms are frequently used by accountants and many business entrepreneurs in the meetings and the work place.

Accounts

Accounts normally consists of profit and loss account, balance sheet, notes to financial statements and directors report. Accounts for companies registered with Companies House must be prepared according to Companies Act 2006 requirements.

Asset

Anything that a business owns; assets include buildings, cash, furniture, and equipment. Tangible assets subject to depreciation and the business is entitled to claim capital allowances on these assets.

Audit

A verification of accounting records and the audit approach is normally on samples basis.

Auditor

An individual not affiliated with the company being audited usually performs an audit. The person must be a registered auditor with the main accountancy bodies in order to qualify to perform audit on UK Company financial statements.

The professional accountancy bodies that issue auditing certificate for practitioners include The Institute of Chartered Accountants in England and Wales (ICEAW), the Institute of Chartered Accountants Scotland (ICEAS)or The Institute of Chartered Certified Accountants (ACCA) or other recognized professional bodies in the UK.

Capital

What the business is worth? Capital for limited companies are in the form of shares invested by their shareholders.

Credit

An entry on the right side of an account ledger

Debit

An entry on the left side of an account ledger

Ledger

A group of accounts of similar types. For example, debtors' ledger containing the accounts of your business customers and creditors' ledger containing the accounts of your suppliers. 

Liability

Anything that a business owes; examples include mortgage, credit card charges, loans and bank overdrafts

Petty cash

A small amount of cash for day to day office small expenses.  

Trial Balance (TB)

TB shows expenses on the debits and income and loans on the credits and the ledger are equal.

Concise Accountancy – Understanding the accounting in business