The abc of Accountancy Jargon

Written by Sam

December 15, 2023

Can you cast your mind back to the last conversation you had about your accounts? Or even the last time you searched the internet regarding accounting? Now, if I asked you if you understood everything you heard, or read, what would your answer be? I expect there were significant elements of that encounter you found confusing and mostly due to the jargon. You wouldn’t be alone in that! Learning the abc of accountancy jargon will help you to overcome confusion.

Accountancy jargon is confusing. learning the abc of accountancy jargon can help you overcome confusion when building your business.

Jargon can be confusing

When I began training as an accountant, accounting seemed to have its own individual language. Quite simply, I had to learn the abc of accounting jargon before I even began to learn accounting processes, regulations and best practice. It struck me, that despite once feeling lost amongst the accounting terms, I now use them constantly. Even when talking to my clients. This is because for much of the time, there is no other way of talking about accounting and my clients accounts without referring to accountancy jargon. However, I understand that can leave my clients feeling a little confused. However, my primary concern is that I want them to feel engaged in our conversations about their accounts. That is how I am best able to help their businesses to succeed and grow.

Even if you do your own accounting, having a grasp on accounting speak can help your business tremendously. Or, if you delegate your accounts to an accountant, learning to converse in the basic terms and concepts will enable you to liaise better with banking institutions and other financial professionals, team members, shareholders, investors and not least HMRC. It will also help you make wiser business decisions.

Learning the abc of accountancy jargons will help you to understand the advice your accountant gives you.

Whether you’re running your own small business or you’re self-employed, it is advisable to stay on top of your finances. That starts with familiarising yourself with some key accountancy jargon and terms. I guarantee it will help you to understand your numbers better and achieve a better overview of the health of your business. Once you have learned these most commonly used terms, you won’t spend the next conversation you have about your accounts wondering what is being said. You’ll actually appreciate the context of the conversation and what it means for your business and your finances.

The abc of accountancy jargon explained.

Here’s a list of commonly used terms:

  • Accrual – A cost which has been incurred, but has not yet paid for, or invoiced. For example, gas and electricity charges, or professional advice given but not yet billed.
  • Accrued Income – Work that you have done but not yet invoiced. This is an asset as costs have been incurred, but the income is yet to be recognised.
  • Assets – Something the business owns that should lead to funds flowing in. 
  • Balance Sheet – A snapshot at a specific point in time of all the assets and liabilities of a business.
  • Benefit in Kind – Non-cash items used to reward staff. They are given a notional cash value which you pay tax on. For example, company cars and health/life assurance.
  • Capital Allowances – The tax equivalent of depreciation. HMRC have their own depreciation policy.
  • Capital Expenditure – Buying things expected to last more than 2 years for example a van or a printer.
  • Capital Gain – This is the profit from the sale of an asset that had been bought or acquired for the business rather than resale. For example, the profit upon the sale of office buildings, or the business itself.
  • Cash Flow – How money has flowed in to/out of the business. A sale will hit the profit and loss as soon as it is made but it won’t appear in the cash flow until it payment.
  • Closing the Books/Year End Closing – This occurs at the end of the annual period and allows for a start with a clean book at the beginning of the next year.
  • Deferred Income – Where someone has paid you/been invoiced in advance of work being done. 
  • Depreciation – An accounting concept to write off the value of an asset over time. 
  • Dividends – Shareholders of Limited Companies may be entitled to dividends. Dividends are taxed on the individual at a lower rate than a salary, but they are paid out of after (corporation) tax profits.
  • General Ledger – Where debit and credit transactions are recorded.
  • Gross Margin (GM) – The tax-free difference between the selling price and the total cost of goods and services sold.
  • Liabilities – A debt the business owes that should lead to funds flowing out of the business.
  • Net Assets – The net value if you sum up all the assets and deduct the value of all the liabilities.
  • Overheads – Costs which don’t directly relate to sales. These are typically also fixed costs. For example, rent and rates, accountancy fees, depreciation.
  • Present value (PV) – Represents the higher market value and use-value, which represents the value of the future economic benefits expected from the use of the asset and its sale.
Learning the abc of accountancy jargon will remove a barrier in business and open doors to success

In Conclusion

Even if you employ an accountant to take care of the majority of the accounting processes for your business, now that you are properly acquainted with the basics of the language that relates to it, you can use this to make better decisions for your business and gain better insights into its growth, stability and future development. More importantly, you needn’t feel confused, or left behind whilst conducting a conversation about your accounts again.

At Reign, we want you to know that if ever you’re confused by the terminology we use, please just ask us to explain ourselves. It is important to us that you understand the advice we give and what it means for your finances. We also appreciate that you may just want to give your accounts to us to process because you don’t have the time learn our language. That’s why the above list of terms is fairly concise because believe me, there is plenty more jargon in the field of accountancy! 

When you’re overwhelmed or confused by your accounts and/or communications from financial institutions, we are here to help. Reach out today for and let us make your finances easier for you.

Nicole Managing Director

Nicole x

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