Accounts Payable
Money your business owes to suppliers for goods or services received but not yet paid for. Appears as a liability on your balance sheet.
Financial StatementsAccounting Glossary
Plain-English definitions of accounting, tax, and business terms. Written for UK business owners by our ACCA-regulated team.
Showing 28 of 28 terms
Accounts Receivable
Money owed to your business by customers for goods or services delivered but not yet paid for. Appears as an asset on your balance sheet.
Financial StatementsAccrual Accounting
An accounting method that records income and expenses when they are earned or incurred, regardless of when cash changes hands. Required for larger businesses in the UK.
Accounting MethodsBalance Sheet
A financial statement showing what your business owns (assets), what it owes (liabilities), and the difference between them (equity) at a specific point in time.
Financial StatementsCapital Gains Tax (CGT)
A tax on the profit when you sell or dispose of an asset that has increased in value. In the UK, the annual exempt amount for 2024/25 is £3,000.
TaxCash Accounting
An accounting method that records income and expenses only when cash is actually received or paid. Simpler than accrual accounting but only suitable for smaller businesses.
Accounting MethodsCIS (Construction Industry Scheme)
A UK tax scheme where contractors deduct money from subcontractor payments and pass it to HMRC. Deductions count as advance payments towards the subcontractor tax liability.
TaxCorporation Tax
Tax paid by UK limited companies on their profits. The current rate is 25% for profits over £250,000, with a lower 19% rate for profits under £50,000.
TaxDepreciation
The gradual reduction in value of an asset over time due to wear and tear or obsolescence. A non-cash expense that reduces profit and tax liability.
Accounting MethodsDividend
A payment made by a company to its shareholders from profits. In the UK, dividends are taxed at lower rates than salary but must come from available profits.
BusinessEBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortisation. A measure of operating profitability often used to compare businesses across industries.
Financial StatementsGross Profit
Revenue minus the direct costs of producing goods or services (cost of sales). Does not include overhead costs like rent or salaries.
Financial StatementsHMRC
Her Majesty's Revenue and Customs. The UK government department responsible for collecting taxes, paying some state benefits, and administering national minimum wage.
TaxInheritance Tax (IHT)
A tax on the estate of someone who has died. In the UK, the threshold is £325,000, with a 40% rate on the excess. Additional relief may apply for main residences.
TaxInvoice
A document issued by a seller to a buyer listing goods or services provided and the amount owed. VAT-registered businesses must include specific information on invoices.
BusinessLimited Company
A business structure where the company is a separate legal entity from its owners. Shareholders' personal assets are protected if the company fails (limited liability).
BusinessMaking Tax Digital (MTD)
A UK government initiative requiring businesses to keep digital records and submit tax returns using compatible software. Mandatory for VAT since 2022.
TaxNational Insurance
UK contributions paid by employees, employers, and self-employed people. Funds state benefits including the State Pension. Different classes apply to different groups.
TaxNet Profit
The amount remaining after all expenses, taxes, and costs have been deducted from total revenue. Also called the bottom line or net income.
Financial StatementsP11D
A form employers use to report taxable benefits and expenses provided to employees, such as company cars or private medical insurance.
TaxPAYE
Pay As You Earn. The UK system where employers deduct income tax and National Insurance from employee wages before paying them.
TaxProfit and Loss Statement
A financial statement showing income, expenses, and profit over a period (usually a year). Also called an income statement or P&L.
Financial StatementsSelf Assessment
The UK system for reporting income and paying tax for self-employed people, landlords, and those with complex tax affairs. Returns are due by 31 January.
TaxSole Trader
A self-employed person who runs their own business as an individual. Simple to set up but the owner is personally liable for all business debts.
BusinessVAT (Value Added Tax)
A consumption tax added to most goods and services in the UK. The standard rate is 20%. Registration is mandatory when turnover exceeds £90,000.
TaxVAT Return
A quarterly submission to HMRC showing VAT charged to customers (output VAT) minus VAT paid on purchases (input VAT). The difference is paid to or reclaimed from HMRC.
TaxWorking Capital
Current assets minus current liabilities. Measures a business's ability to meet short-term obligations and fund day-to-day operations.
Financial StatementsYear End
The date on which a company's financial year finishes. Annual accounts and corporation tax returns are prepared based on this date.
Accounting MethodsNeed help understanding your accounts?
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