If you are a new business and have not had the experience of accountancy, you may come across some terms that are regularly referred to by accountants. The terms used can seem confusing at first so we have prepared a jargon buster list to help give you some understanding of what the terms mean.
1. Accountant – An accountant is a person who looks after the business finances of companies. Services accountants offer may depend on the needs of individual clients. Accountants can provide analysis and advice and prepare financial reports, manage financial data and submit tax returns on behalf of their clients.
2. Actual Accounts – Actual accounts show a true and accurate record of a company’s business at year-end and this usually includes all assets and liabilities.
3. Audit – An audit is an official inspection of financial accounts for a company. Audits are usually done before the submission of the end of year accounts. It is worth noting that you should not ask your own accountant to complete an audit of your business account, this should be done by another accounting company.
4. Audit Trail – An audit trail is a set of documents that provide historic evidence of the transactions of a business. The main purpose of an audit trail is to help the auditor to verify all business transaction over a set period.
5. Balance Sheet – The balance sheet gives a snap shot of a company’s financial status at different points in time. It shows what a business is worth and includes all assets and liabilities.
6. Bookkeeper – A bookkeeper keeps an accurate record of all business transactions by recording them in ledgers or by using computer software. Bookkeepers can produce reports for submission to a client or accountant.
7. CIS Sub-contractors – The initials CIS stand for Construction Industry Scheme and applies to contractors and sub-contractors. The scheme applies to all payments made to the construction industry such as builders. If you have not used this scheme before it is best to seek advice from HMRC.
8. Capital Gains Tax – Capital gains tax is applied to any profit that has been made when assets have been disposed of by transferring the asset, selling, receiving compensation for the asset or by giving it away. HMRC has full guidelines to help clarify any exemptions from this rule.
9. Filing and Submissions – Filing and submissions are terms used for getting accounts to HMRC. This is done by either filing out a returns form or submitting the details on the HMRC website. Penalties can be made on those businesses who fail to file or submit their tax returns in the given time period.
10. Payroll – Payroll deals with accounting for wages of employees. This includes tax deductions, national contribution payments, and absence due to sickness or holidays. The details are submitted to HMRC using various forms such as a P45, P46, P35 employer annual return, P11d employee expenses including class 1A National Insurance Contribution and P11DW6 for mileage allowance.
11. VAT Return – The VAT return is a form used for submitting company financial details to HMRC. This can be done online using the web filing system or by paper form sent from HMRC. The information provided on this form will assist HMRC in calculating a credit or liability payment.
12. Year End – Year End refers to a business end of year date. At first a new company’s end of year date may not be the same as the financial year also known as the fiscal year. The yearend date is the 5th April.