20 phrases that accountants commonly use
Every business uses shorthand (also known as jargon) to describe certain functions so here are some explanations of common words used by accountants and the like:
Bookkeeping (alternatively spelt book-keeping or book keeping)
This is the process whereby you combine your sales invoices, expenses and bank transactions into one place and analyse it by the type of income or expense. The better your bookkeeping, the cheaper your accountant’s fees. Your books should be checked (reconciled) to your bank statements each month. We are able to provide bookkeeping advice to clients.
These can be as simple as a spreadsheet (or even a large piece of paper). We like to use Sage One which is internet based software. This can be used to produce sales invoices but the real advantage is that your accountant can see what is going on at the year end or any time that you may need assistance.
This is the person who does the bookkeeping. A specialist bookkeeper will save you time and we would recommend that you ask your accountant about this as soon as you can afford one. Bookkeepers can be employed by one company or do work for several smaller companies on a weekly, monthly or quarterly basis. A good bookkeeper may save a little of your accountant’s fees. We are able to provide bookkeeping services to clients.
This is the process of producing accounts in the required statutory (legal) or tax formats. It starts with a good set of books/software. Your accountant will make certain adjustments for example: capital items (items for use in the business over more than one year), stock and items not yet invoiced.
An accountant is the person who prepares your accounts. Anyone can call themselves an accountant.
A Chartered Accountant is one who has passed postgraduate exams in accountancy and tax. They are members of the Institute of Chartered Accountants of England and Wales (or Scotland or Ireland) known as ICAEW. In order to remain Chartered they most undertake continuous professional training each year so that they are always up to date. To run an accountancy business they must have professional indemnity insurance and are subject to inspection by ICAEW. The name Chartered Accountant is protected in law. Members can use the letters ACA or FCA after their names indicating their level of experience.
Similar to a Chartered Accountant but a member of the Chartered Association of Certified Accountants. Members can use the letters ACCA or FCCA after their names.
This is the abbreviation for the government department known as Her Majesty’s Revenue and Customs which was formed by combining the old departments of Her Majesty’s Customs & Excise with the Inland Revenue. This department is responsible for the collection of all UK taxes such as income tax (from individuals, sole traders and partnerships), corporation tax (from limited companies), inheritance tax, capital gains tax, stamp duty, value added tax (sales tax) etc
Many years ago the Inland Revenue (now HMRC) switched from calculating tax to a self assessment system whereby the taxpayer calculates their own tax which is then subject to inspection and checking by the tax authorities. It is the individual’s responsibility to calculate the correct amount of tax otherwise they will be subject to penalties. These are made by way of an HMRC return or tax return.
Limited companies must submit an annual return to Companies House each year. This records information about the directors and shareholders of the company and is separate from the accounts. We can provide help with annual returns. If annual returns are submitted late the directors can be fined.
These are the people responsible for running a limited company. In small companies they are often the shareholders too. Directors have many legal responsibilities so it is wise not to accept such a position without first checking up on these requirements
These are the people who own parts (shares) of a limited company.
These are the accounts required by law by Companies House or HMRC. They must contain certain information in a prescribed format. For most limited companies they must be submitted as iXBRL files. This makes it machine readable for analysis by HMRC or other organisations. We can convert your accounts into iXBRL if required.
Also known as the Registrar of Companies. Just as individuals must be registered at birth so new limited companies must be registered at Companies House. Limited companies must submit statutory accounts and an annual return (information about directors, shareholders etc) to Companies House each year. This information is available to the public for a nominal fee. We can help with your annual return or to prepare accounts in the right format.
These are accounts that are produced in any useful format for use within a business. Management accounting should provide useful information and may consist of information on more than just the financial affairs of the business e.g. head count and orders. These accounts/reports should help management to make informed decisions.
This is the process of growing or developing your business. Chartered Accountants are able to offer business development advice.
This is the process of checking the accounts to ensure that they provide a true and fair view of the financial affairs of the business. This is carried out by a top level review and sample checks and is not guaranteed to detect fraud. Statutory audits are only required by certain companies and are carried out by a Registered Auditor. As these are less common now we can refer you to an experience Registered Auditor if you require one.
This is a specialist area of accounting and involves an in depth examination of any or all of a business’s financial affairs.
Independent review or examination
Most smaller charities do not require a full audit but instead an examination of the accounts and underlying records by an independent person. Depending on the size and other requirements of the charity this may need to be done by a Chartered Accountant or equivalent. We can provide this service for charities.
This is the process of checking a business’s books against third party information. The most common is a bank reconciliation where the bank transactions recorded in the business’s books are checked against those on the bank statement. Sometimes there are a few differences such as cheques written (and recorded) by the business that have not yet cleared the bank account.
Year end (or period end)
Statutory accounts are usually prepared for a full year. The last date of this year is known as the year end. Year end is also used to describe the process of finishing the bookkeeping or accounting.