Change UP your accountancy business
Full to the brim with clients and feeling the pressure?
Get paid much quicker with our help.
Leading and managing a team is not easy. Here’s some help
At Profits Plus, we have prepared the ultimate accounting glossary to help you understand all the key financial terms and definitions.
A record used to classify and summarise financial transactions in a systematic manner.
The gradual reduction of an intangible asset’s value over its useful life, similar to depreciation for tangible assets.
Income or expenses that are recognized before cash changes hands, based on incurred obligations or earned revenues
A contra-asset account that represents the estimated portion of accounts receivable that may not be collected.
The process of recording and classifying financial transactions in the accounting system
A financial statement that provides a snapshot of a company’s financial position, showing assets, liabilities, and equity at a specific date.
The value of an asset as recorded on the balance sheet, often different from its market value.
A financial statement that shows the inflows and outflows of cash and cash equivalents during a specific period.
The process of combining financial statements of parent and subsidiary companies into a single set of financial statements.
The direct costs associated with producing goods, including materials, labour, and overhead.
A system where every transaction is recorded with equal debits and credits to ensure that the accounting equation (Assets = Liabilities + Equity) remains balanced.
An account that reflects taxes that will be payable in the future due to temporary differences between book and tax accounting methods.
Depreciation is the systematic allocation of the cost of tangible assets over their useful lives.
A measure of a company’s operating performance, calculated as revenue minus operating expenses, excluding interest and taxes.
An accounting technique used to account for investments in associates, where the investor’s share of the associate’s net income is recognized as income.
Are reports that summarise a company’s financial activities, including the income statement, balance sheet, and cash flow statement
Calculations that provide insights into a company’s financial performance and position, such as the current ratio, debt-to-equity ratio, and return on equity.
Generally Accepted Account Principles.
The excess of the purchase price of an acquired company over the fair value of its net assets, representing intangible value like reputation and customer relationships.
Also known as the profit and loss statement, it shows a company’s revenues, expenses, and net income over a specific period.
Non-physical assets that lack a physical presence but have value, such as patents, trademarks, and copyrights.
Debts or obligations owed by a company to external parties
An inventory valuation method where the most recently acquired items are assumed to be sold first
Treating a lease as a purchase and recording the lease payments as an asset and corresponding liability
The combination of two or more companies into a single entity, often resulting in a new corporate identity.
The UK government has launched an initiative called Making Tax Digital (MTD), which mandates businesses and individuals to maintain digital records, use software that is compatible with MTD, and submit updates every quarter
The present value of future pension payments owed to employees based on their service and expected benefits
A financial ratio that measures a company’s ability to generate profit from its revenue.
Amounts owed to suppliers or creditors for goods and services purchased on credit.
Payments made in advance for goods or services that will be received in the future.
A measure of the profitability of an investment, calculated as the net profit from the investment divided by its initial cost.
Amounts owed to a company by its customers or debtors for goods or services provided on credit.
Accumulated profits that a company has not distributed as dividends.
The practice of reporting financial information for different operating segments of a company, often reflecting its diverse business activities.
Contracts that give employees the right to buy company stock at a predetermined price, often used as a form of employee compensation.
See ‘Cash Flow Statement’
The reduction in taxable income resulting from deductible expenses like interest payments and depreciation.
A list of all general ledger accounts with their debit and credit balances to ensure that debits equal credits.
A change in the value of an investment that has not been sold, resulting in paper profits or losses
Payments received in advance for goods or services that will be provided in the future.
The process of determining the economic value of an asset, liability, or entire company, often involving various methods like market, income, and cost approaches.
Working capital assesses a company’s capacity to fulfill its immediate financial responsibilities, including payroll, inventory, and accounts payable, and is determined by deducting current liabilities from current assets.
Cookie | Duration | Description |
---|---|---|
cookielawinfo-checkbox-analytics | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics". |
cookielawinfo-checkbox-functional | 11 months | The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional". |
cookielawinfo-checkbox-necessary | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary". |
cookielawinfo-checkbox-others | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other. |
cookielawinfo-checkbox-performance | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance". |
viewed_cookie_policy | 11 months | The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data. |