Bookkeeping Terms

Bookkeeping termsThere are many bookkeeping terms which you may be unfamiliar with, here we list most of the terms that are used. There are also some accounting definitions to make a list complete. Some have links included so that you can research the subject further.

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

As there are so many bookkeeping terms they are on several different pages, links can be found at the bottom.

Bookkeeping Terms A-D

AccountantThe person who looks after or inspects the business accounts. They are normally qualified by one of the regulatory bodies.
AccountingProcess of keeping the business financial records.
AccountsThe financial statement of a business in a given period (week, month, quarter or year). The reports will include a balance sheet and Profit and Loss.
Accounts PayableMoney owed to a supplier from bills or invoices that have been received. An Accounts receivable report shows all amounts owning and how overdue they are.
Accounts ReceivableMoney owed from a customer for a sales invoice. Accounts receivable report will show total amount owing to customers.
Accounting EquationThere are several accounting equations that help show how well a company is performing. An example is the current ratio, which shows how solvent the business is short term. Current assets divided by current liabilities = current Ration
AccrualsExpenses that relate to an accounts period but have not been billed. A journal is normally raised to added it to the accounts.
Aged CreditorsSee Accounts Payable
Aged DebtorsSee Accounts Receivable
AssetsItems that a business owns that has a value. These can be both fixed assets computers, equipment and buildings or intangible assets like patents, copyright and trademarks.
Bad DebtsAn amount owing from a customer that will not be paid, there can be several reasons for debts not being paid including the customer has gone into liquidation.
Balance sheetA financial statement which shows a snap shot of the companies financial position. It shows all the assets, liabilities and equity.
BankPart of the balance sheet report showing how much money is in the bank.
BookkeepingThe process of preparing the accounts and recording financial transaction, it includes purchases sales, receipts and payments.
Bookkeeping CycleThe process of steps from entering a transaction to preparing the financial statements, includes: Documents, journal, ledger, trial balance, adjustments, closing accounts and preparation of final accounts.
BudgetIs a financial plan for a future period usually a year; it will show where financially the business is expected to be and future.
CapitalThe wealth of the business, whether in money or property, owned or employed in business. It can be found on the balance sheet.
Cash-flowThe movement of money in and out of the business. A cashflow forecast shows future income and expenditure over a period of time.
Chart of AccountsThe list of all accounts within an accounting software package. They include Assets, liabilities, capital, income, cost of sales and expenses.
Contra EntryFor every transaction in the accounts a reverse entry needs to be made. Therefore a debit entry in one account will have a credit entry in another.
Corporation TaxIn the UK tax is paid on profits of the company.
Cost of Goods SoldIs the cost price of goods sold and is shown on the Profit and Loss account.
Credit NoteIf a refund is due to a customer a credit note will be raised in the accounts to reduce the sales invoice.
CreditorsCan be a bank, supplier or person that has given credit to the company. Therefore the business would owe money to its creditors.
DebitDouble entry accounts are made up of debits and credits. A debit is on the left side of accounts. An example is on the cash account if money is received it is recorded on the left side of the cash account.
DebtorsA business or person that has borrowed money from your business. It may be that you have supplied work on credit and therefore issued a sales invoice, this is money that is owed to you.
DepositMoney paid into a bank or building society. It can also be an initial payment made for goods that are going to be paid in instalments.
DepreciationEquipment that is purchased for use in the business is reduced by value over a period of time. An example of this is that a computer is purchased for £300 and reduced in value over three years, the depreciation will be £100 per year under straight-line depreciation.
DividendsA percentage of profits paid to shareholders. An example is a business made a profit of £10,000 and paid two shareholders £5000 each as they both hold 50% of the shares.
Double EntryEach transaction needs to be entered as a credit on one account and a debit to the other account. This is the basis of double entry bookkeeping.
DrawingsIf you are a sole trader or partnership, when you withdraw money from the business it is know as drawings.

Bookkeeping Terms E-M Bookkeeping Terms N-Z

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