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Glossary

  • (ACCA): Association of Chartered Certified Accountants
    (ACMA): Associate Chartered Management Accountant
  • Accounts Payable:  Accounts of monies in which you owe.  A liability that is usually created when you have made a purchase or purchases on credit.
  • Accounts Receivable: Accounts of monies owed to you for the sale of goods or services.
  • Accrual basis:  This is the method of accounting where transactions are recorded as they occur regardless of when payment for that transaction is made or received
  • Accrued Assets:  Assets from revenues earned but not yet received.
  • Accrued Expenses:  A liability incurred during the accounting period for which payment has not been made.
  • Accumulated Depreciation: The running balance of the depreciation taken on an asset.
  • Accounts Receivable: Accounts of money owed to you for the sale of goods or services.
  • Aging: The grouping of like transactions by date. Example - sorting invoices by due date.
  • Adjusting Entries: Special accounting entries that are made when you close the books at the end of an accounting period to bring the ledger up to date.
  • Asset: Items that a business or individual owns or are owed.
  • Audit: The scrutinising of accounting records and supporting documents for accuracy and completeness.
  • Audit trail: The information within the accounting system that reveals the effects of a transaction.
  • Bad Debt: An account or receivable that has been deemed unrecoverable and written-off.
  • Badwill (Negative Goodwill): The excess amount of fair value of an asset or assets over the purchase price.
  • Balance Sheet: A statement listing the total assets, liabilities, and owners' equity; indicating the net worth of the company for the given time period.
  • Bonds Payable: A long-term liability that represents a promise to pay a sum of money plus interest at a maturity date (a designated date in the future).
  • Book Value of an Asset: Cost of the asset (the amount that was paid for it) minus accumulated depreciation.
  • (CIMA): Chartered Institute of Management Accountants
  • (CIPFA): Chartered Institute of Public Finance and Accountancy
  • Capital: The owner's or owners' rights to assets of a business.
  • Cash basis: An accounting method where transactions are recorded when the actual change of payment occurs, regardless of when the goods or services are delivered.
  • Cash equivalents: Highly liquid short-term investments.  Examples include money-market funds and treasury bills.
  • Certified Financial Statements: Financial statements that have been audited and certified by a CPA.
  • Chart of accounts: A numerical listing of a business’s accounts.
  • Closing Entries: Journal entries made at the end of the period to return the balance in all accounts to zero and ready the account for the next reporting period.
  • Contra account: An account that follows another account and has a balance opposite of it.  For example accumulated depreciation is a contra asset account; it would have a credit balance and be subtracted from the asset's debit balance to obtain the book value or carrying amount of the asset.
  • (CPA): Certified Public Accountant
  • (Cr): The abbreviation for Credit.
  • Credit: An entry on the right side of an account - decreases assets or increases liabilities.
  • COGS  The abbreviation for Cost of goods sold
  • Debit: An entry on the left side of an account - increases assets or decreases liabilities.
  • Depreciation: The allocation of the cost of a tangible, long-term asset over its useful life. The process of spreading the cost of acquiring a fixed asset over its useful economic life.
  • Dividends: Distributions by a corporation to its shareholders.  Dividends decrease both the assets and retained earnings of the corporation.
  • Double Entry is the principle of accounting which requires that every transaction has two effects one of which is a debit and the other of which is a credit of the same amount.
  • Dr The abbreviation for Debit.
  • Expenses: The daily costs incurred in running a business.
  • Extraordinary Gain or Loss: A gain or loss that is both unusual and infrequent.
  • FIFO (First IN First OUT) The inventory system leave new inventory in stock until the old ones sold by legal terms.
  • Finished Goods Inventory: Completed goods held in inventory that have not yet been sold.
  • Fixed Asset:  An asset acquired by a business where there was no intention to make money from immediately reselling the asset. e.g A Van used by a building company.
  • Fiscal: A 12 month accounting period. Not necessarily a calendar year.
  • General Ledger: The master record of all the balance sheet and income statement account balances.
  • General partnership: A partnership form of business where each partner is a part owner and shares in the privileges and risks of ownership.
  • Gross profit: The amount of net sales minus the amount of cost of goods sold (also called cost of sales).
  • (ICAEW) Institute of Chartered Accountants in England and Wales
  • (ICAI) Institute of Chartered Accountants in Ireland Constitutes the Republic of Ireland and Northern Ireland. It is considered to be both a British and Irish professional body.
  • (ICAS)  Institute of Chartered Accountants of Scotland
  • Income statement: A statement that summarises revenues and expenses.
  • Intangibles: Assets that have no physical form but that have value.  Examples are copyrights and patents.
  • Invoice: A form, sent from the seller to the buyer, listing the items bought, price, terms etc.
  • Journal: A chronological record of transactions, also known as the book of original entry.
  • Just-in-Time: A system where items are produced or received just in time to be used or sold.
  • Ledger: A book containing accounts to which debits and credits are posted from books of original entry.
  • Liability: A debt or obligation. Probable future sacrifice of economic benefits; or the entity owes somebody something.
  • Net sales: The amount left when returns, discounts, and allowances are deducted from sales revenue.
  • Note payable: A written promise to pay a determined amount in the future.
  • Operating Expenses: The expenses that are incurred from the daily operation of the business.
  • Owners' equity: The owners' right to the assets of an entity.
  • Prepaid Expenses:  Amounts that are paid in advance for product is not used up during the accounting period.
  • Prepayment:  A Prepayment is a type of asset arising from the fact that the business has already been invoiced for the right to all or part of a service in a future period e.g. rent for next year, paid this year.
  • Post: The process of transferring amounts from a journal to the appropriate ledger accounts.
  • Purchase order: Written instructions to a vendor to ship and bill for the listed items.
  • Retained earnings: Capital earned operations of the corporation.
  • Reversing Entry: An entry made to reverse a prior entry.
  • Revenue: Amounts earned by delivering goods or services to customers.
  • Stock: Stock is the set of those assets held by the business intended for resale in their current form or in a modified form. Stock includes raw materials, components, work in progress and finished goods.
  • Trial Balance: A work sheet showing the balances in each account; used to prove the equality of debits and credits.
  • UEL: The abbreviation for useful economic life.
  • Useful economic life (UEL): The useful economic life of a fixed asset is the time period for which the asset is likely to be useful in generating profit for a company (or meeting the aims of a charity).
  • WIP
    WIP is the abbreviation for Work in Progress
    Work in progress is the set of assets held by a business which are part way through some process after which they can be resold. Once completed the articles will cease to be WIP and become finished goods.