Change Currency: GBP USD EUR JPY CAD AUD CHF RUB CNY ZAR MXN

Change Language: Deutsch Dansk English (UK) English (US) Español Française עברית (ישראל) Dutch Türkçe

Accounting & Finance Reference Guide

Below you will find a number of common business accounting and finance terms defined. While this is primarily a short list of terms you are most likely to come into contact with as it relates to small business finances, we do help you will find this useful during your evaluation phase (and even beyond).

·         Accounting Period – the period for which you are reporting – typically used for financial statement preparation purposes. Typical accounting periods are months, quarters, or years.
·         Audit - the process undertaken by your accountant/auditor to check and verify your books and records. Part of this process includes checking that your internal accounting procedures are applied consistently and follow legal requirements.
·         Auditors - the individual or team of accountants who audit your records.
·         Accounts Payable - money owed by your business to its creditors.
·         Accounts Receivable - money owed to your business by its debtors.
·         Asset - something of value owned by the business. An asset can be fixed, current or liquid.
·         Audit - the process undertaken by your accountant/auditor to check and verify your books and records. Part of this process includes checking that your internal accounting procedures are applied consistently and follow legal requirements.
·         Auditors - the individual or team of accountants who audit your records.
·         Balance Sheet - a snapshot taken at a particular time, which shows the business’s assets and liabilities. The excess of assets over liabilities will equal the equity in the business and approximates the value that will remain in the event of liquidation.
·         Balloon Payment - when you take out a loan you will agree to make loan repayments of a certain amount. Some loans have a set repayment figure for an agreed period and then a large one-off final payment - a balloon payment. Balloon payments are common on loans taken out to purchase company vehicles where often the owner has the choice of either making the large payment or returning the vehicle to the loan company.
·         Budgets/Budgeting - an estimated financial plan for a given period of operation. It summarizes projected income and expenditures. A budget should be monitored and revisited monthly and provides a business the opportunity to take action to correct any exceptions identified.  
·         Business Plan - a plan that details what you are aiming to do with your business and how you are going to achieve your objectives. This is a key tool in persuading lenders to extend a loan.
·         Capital – the total amount tied up in the fixed and current assets of the business.
·         Capital Expenditure – expenditure on the fixed assets of the business.
·         Cash Flow - money coming into the business and money going out. It is important to control cash flow to ensure that funds are kept within agreed limits.
·         Collateral - property put forward by the borrower which the lender will take if they are unable to pay back a loan.
·         Credit – time allowed purchasers to pay for goods or services supplied to them.
·         Credit Agency or Bureau - provides information about companies’ credit ratings.
·         Credit Rating - a business’s history relating to repayment of past loans or debts.
·         Creditor - a supplier who has provided products or services to the business and has not yet been paid for them.
·         Current Assets – assets which are expected to be converted into cash within one year.
·         Debtor - a customer who has taken products or services and has not yet paid for them.
·         Depreciation - the amount by which the value of items such as equipment, cars, property etc, decreases due to wear and tear and the passage of time.
·         Direct Costs – see Variable Costs.
·         Factoring - a process where a business assigns money owed by customers to a company who immediately pays them a percentage of the invoice value and a further percentage when the customer pays the bill. The factoring company takes a percentage of the overall debts for providing its service.
·         Fixed Assets – assets that are retained and used in the business on a long-term basis.
·         Fixed Costs – overheads which remain the same regardless of the amount of goods sold or produced, for example rent or administrative staff salaries.
·         Gross Profit or Loss – sales less the Direct Costs
·         Guarantee - a third party guarantee to pay your loan if you default on repayments.
·         Indirect Costs – see Overheads.
·         Investor - a funding source that shares in the profit or loss of your business. based on the percentage he owns. Unlike, lenders, investors have potential for both greater reward and greater loss based on the success of your business.
·         Line of Credit - money on loan over a period of time but held as a reserve to be used as required.
·         Liquid Assets – cash or assets which can be quickly and easily converted to cash.
·         Net Profit or Loss - the surplus or deficit after all operating expenses and investment items such as interest (paid or received) and income taxes have been taken into account.
·         Operating Expenses - regular operating expenses of the business operation, excluding investment costs such as interest and income taxes.
·         Operating Profit or Loss - the profit or loss generated by the business operation after the operating expenses have been deducted but before any tax, interest (paid or received) and extraordinary costs have been taken into account.
·         Overheads – also known as indirect costs - operating expenses not directly related to the production of goods or services.

Share

 

2015 Global Accounting, LLC

All Rights Reserved

Mobile Site

Website Design by Darnik McAlpin

Dog