Accounting Terms

Accounting Terms word cloud

This is the final section of the accounting terms and bookkeeping definitions. Our list incorporates the most popular terms with a brief description of each one. Links are provided on some for further reading and research.

There are so many we have split the list into three sections; this is a section the final part including N to Z

The other parts of accounting terms can be found using the links at the bottom of the page.

f you cannot find a term or definition that you need, please get in contact, and we will try and add it in.

Accounting Terms N-Z

Net Assets

The total assets less liabilities. The figure equals equity, if it is a sole partnership, it is the owner’s equity and if a corporation its stockholder’s equity.

Net AssetsThe total assets less liabilities. The figure equals equity, if it is a sole partnership, it is the owner’s equity and if a corporation its stockholder’s equity.
Net Book ValueIs the net value of assets. Assets are purchased at a price and depreciation is deducted over a period, the purchase price less depreciation equals the net book value.
Net ProfitGross profit less expenses equals your net profit. Revenue minus cost of goods equals gross profit minus expenses equals net profit.
Nominal AccountsEach transaction of revenue, expenses, gains and losses are posted to a code in computerised accounts and each code is a nominal account.

Opening BalancesTo transfer your accounts from one system to another you will need to post the closing balances from one to the opening balances of the other. It can also be the case if you are switching from paper-based or Excel spreadsheets.
OverdraftIf a bank balance is negative then you have gone overdrawn. There will typically be fees attached to the overdraft, and it is best to arrange terms before using an overdraft.
PAYEPay as You Earn is the UK payroll which deducts tax and NI each time you get paid.
Petty CashSmall amount of cash that is kept to purchase sundry items. For a more significant business, procedures need to be in place for issuing money.
PrepaymentsIf you pay for something in advance you are prepaying for it and should only post the amount that relates to the period. An example is an insurance policy purchased for a year for £100 but only £30 relates to this financial year the remaining balance of £70 is transferred to prepayment account.
ProfitIf the revenue of the business is more than the cost of sales and expenses a profit will have been made.
Profit and LossA financial statement which shows the revenue and expenditure over a period.
Purchase LedgerRecords all of the purchase and expenses. It will show a list of all the outstanding invoices and how much you owe. An account for each supplier is set up.
ReceiptA document of having received money for the sale of goods or services.
ReconcileTo reconcile an account you need to provide evidence that the account balance is correct.
Record KeepingIn bookkeeping and accounting it is important to keep your information up to date. Records need to be kept for a certain length of time and should be organised in an easy to use system.
RecurringA transaction that is completed on a weekly, monthly or annual basis for the same amount is called a recurring transaction. Most accounting packages will set up a template and automatically produce the document.
Reducing BalanceMethod where an asset is reduced by depreciation each year. Reducing balance means that you reduce the balance more in the early years. An example is an asset of £20,000 is reduced by 40% (£8,000) leaving a value of £12,000 in second year it is 40% of the remaining value of £12,000.
RemittanceA sum of money that you send a customer for goods or services; remittance advice is a document that you submit with it.
Retained ProfitsMoney that is kept in the business rather than paid to the shareholders as a dividend.
RevenueThe amount of money that a business receives in any period and is shown at the top of the profit and loss account report.
Sales LedgerA record of all the sales, if the money has been received and any amounts that are still outstanding. Each customer has an account with all the details recorded.
Self EmployedIs someone who runs their own business and is responsible for its success or failure. They are not paid under the PAYE system but instead registered for self-assessment tax.
ShareholdersAre the people or business that have invested in the company. The shareholder funds are calculated by assets less liabilities. Shareholders can take money out of the company by dividends.
Single EntryTransactions are only recorded once in the ledger. For most this system is too simple and double entry is required.
StatementA document which sets out transactions between debits and credits. There are bank, supplier and customer statements, which will show transactions for a given period.
Straight Line BasisA method of depreciation that reduces an asset for the same amount each period. Example a computer is purchasedd for £360 and will be depreciated over three years; the depreciation posted to the accounts is £10 per month (this assumes that the asset has no value at the end of useful life).
SubsistenceMoney paid to cover travelling on business, it can cover the cost of travel, overnight stay, meals and other expenses which relate to the trip.
Tangible AssetsAre physical items that the business owns and can include computers, equipment, furniture, fixtures, stock and buildings. It recorded on the balance sheet.

The movement from one account to another or change in ownership for an asset.
Trial BalanceAn accounting report which lists all the debits and credits of all the general ledger accounts. It is typically run by an accountant at the year-end to review all the accounts.
TurnoverThe value of goods or services sold in a period.
VATValue Added Tax – if you are VAT registered you will need to add VAT to your sales invoices and claim back from purchases. There are several different VAT schemes and it is worth finding the best one to suit the business.
Work in ProgressThe value of work that has not yet been competed. An example is a manufacturing company at the period end would calculate the amount of any unfinished work.
Write OffRefers to debt from a customer that you do not expect to be able to collect, the debt needs to be written off from the sales ledger.
Year EndThe end of a financial year, accounts will need to be produced at the end of each year.
Accounting Terms A-D Accounting Terms E-M

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