The Accountancy Jargon Cheat Sheet

Too many accountants use words that business owners just don’t understand (and don’t really need to!).  So we’ve put this cheat sheet together so you know what they mean!

Net Profit = Your sales less all of your costs – materials, stationery, travel, telephone, advertising etc
Overheads = Costs that you have to meet each month – ie rent, telephone, internet etc
Assets = Equipment you actually own – ie your computer, tablet, large tools etc, as well as cash in your bank account
Liabilities = Money you owe/bills you need to pay
Debtor = Someone who owes you money
Creditor = Someone you owe money to
Accrual = This is something you need to pay in a tax or financial year, that you haven’t received the bill for – ie if you pay for your accounts after
your tax year we will include an accrual for the accountancy fees for that year
Prepayment = This is something you’ve paid during a tax or financial year, that relates to the year after – so you’ve pre paid it – ie an insurance policy that
covers 6 months of current year and 6 months of next year
Management Accounts = Reports showing the profit and loss and other financial information for the period – usually either monthly or quarterly
Compliance = Year End Accounts and Tax Returns that must be prepared and filed
Advisory = A service where accountants provide information to help advise a business owner to plan for the future
Cash Flow = This is the cash that flows into and out of your business account – so the cash you receive and pay out. A cash flow forcast uses information in
your accounts to predict when you will have money in your account and when you are likely to be a little low on funds and may need help to pay
your bills
Balance Sheet = This is an accounts report that helps to see how healthy your business is. It shows the value of cash and equipment you own, plus everything you need
to pay out. Your Balance Sheet should always be a positive figure – if it is negative you may need some help to make your business healthier
Break Even Point = The sales you need to cover all of your expenses
Stock Turnover = How long it takes to sell your stuff
Debtor Days = How long it takes to be paid
Cash Burn Rate = When you will run out of cash

This is a very general guide to help you understand what you are reading in reports/what you are being told.  For a full and more specific explanation specific to you please do not hesitate to ask us.   At PPF we promise to use plain old english and no accountancy jargon Smile

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