Whether you’re a self-employed individual, a small business owner or CEO of a large agency, accountancy and tax is an inevitable part of being a working adult and we’re all bound to be faced with payroll or HMRC dilemmas at some point.
Getting to grips with understanding accountancy jargon is a tricky business, but we are here to help with a basic list to get you started:
Accounts Payable (AP): Money owed by the business or company to another business for services or goods they’ve provided.
Accounts Receivable (AR): Money owed to the business or company by its debtors (people or companies who have not paid for your services).
Accrual: An expense due but not yet recorded or invoiced.
Assets: All items or possessions owned by the business or company (money, vehicles, equipment etc).
Audit: An official inspection of a business’ accounts.
B2B and B2C: Business to business is selling to other businesses. Business to consumer is selling to the public.
Balance Sheet: A report summarising a business’ financial situation including all assets, income and expenses.
Bookkeeping: Keeping a detailed record of receipts and expenses.
Capital: Money belonging to the business owner.
Corporation Tax: Tax imposed on company profits.
Credit Notes: Receipt of money given to someone who has returned goods, which can be offset against future purchases.
Depreciation: Reduction in value of an asset (another word for this is ‘amortisation’).
Dividends: A sum of money paid annually to its shareholders out of company profits.
Equity: The value of your assets once debts have been subtracted.
Financial Year: A year for taxing or accounting purposes, usually April to April.
HMRC: Stands for HM (Her Majesty’s) Revenue & Customs. The UK Government department responsible for the collection of taxes.
Income Tax: A tax imposed on personal income.
Inheritance Tax: A tax imposed on property, money and possessions of someone who’s died.
Liability: Debts owed by the business to others, including accounts payable, loans, wages and taxes.
National Insurance: A compulsory payment made by employees and employers to provide assistance for people who are sick, unemployed or retired.
Overheads: Business expenses not including labour, materials or direct expenses. They include accounting fees, advertising, insurance, rent, bills etc.
PAYE: Pay As You Earn. The name for an income tax system where an employee’s tax and national insurance contributions are deducted before the wages are paid.
Pensions: A regular payment that’s taken from your monthly wages, which will be regularly paid back by the government to people when reaching the official retirement age.
Personal Allowance: The amount of income you don’t have to pay tax on (currently, the UK’s personal allowance is £11,850).
Self Assessment Tax Return: You will do these annually if you’re self-employed or if HMRC requests one from you.
Tax Evasion: A criminal offence which involves individuals or businesses paying too little tax or wrongly claiming tax repayments.
VAT: Value-added tax is a tax that is added to the price of goods or services (currently, VAT is 20% in the UK).
Tax and accountancy can be extremely difficult to understand. If in doubt, it’s always a good idea to talk to an accountant, to save you from any government fees or prosecution. At Barron & Co., we advise and help individuals and businesses with their tax and payroll. Call us today for an appointment or visit our website for more information.