Key terms you need to know in Accounting, Audit & Tax

Every industry comes with its own vocabulary – technical terms and jargon that can seem impenetrable at first. And Accounting, Audit & Tax is no different. Make sense of it all with our guide to the key terms you'll need to get your accountancy career off to a bright start.

Swot up on these key accounting tems and you won't make a pig's ear of your interview

Accountant – A person trained to prepare and maintain financial records.

Accounting period – Time period in which financial statements are prepared (e.g. month, quarter, year).

Accounts – Financial statements prepared for the end of a period to reflect the financial position of an entity.

Accounts payable – Amounts due for payment to suppliers of goods or services, also described as trade creditors.

Accounts receivable – Amounts due from customers, also described as a trade debtors.

Assets – Something a business owns/uses, e.g. equipment or rights to a trademark.

Audit – An audit is the independent examination of, and expression of opinion on, financial statements of an entity.

Bad debt – It is known that a credit customer (debtor) is unable to pay the amount due.

Balance sheet – A statement of the financial position of an entity showing assets, liabilities and ownership interest at a date.

Capital – An amount of finance provided, generally by the owners or shareholders, to enable a business to acquire assets and sustain its operations.

Corporation tax – Tax payable by companies based on the taxable profits of the period.

Depreciation – The apportionment of the cost (or value) of a fixed asset against profits over its useful life.

Entity – Something that exists independently, such as a business which exists independently of the owner.

Equity – A description applied to the ordinary share capital of an entity.

Expense – Generally the running costs of a business.

Forecast – Forecast estimate of future performance and position based on stated assumptions and usually including a quantified amount.

Gross profit (or margin) – Sales minus cost of sales before deducting administration and selling expenses.

Inventory – Stocks of goods held for manufacture or for resale.

Invoice (bill) – A document from supplier to buyer summarising goods or services supplied and the price payable.

Liabilities – Debts owed by a business.

Liquidity – The extent to which a business has access to cash or items which can readily be exchanged for cash.

Net profit – Sales minus cost of sales minus all administrative and selling costs.

Profit – Calculated as revenue (income) minus expenses.

Profit and loss account – Financial statement presenting revenues, expenses and profit. Also called income statement.

Shareholders – Owners of a limited liability company.

Sole trader – An individual owning and operating a business alone.

Stakeholders – A general term devised to indicate all those who might have a legitimate interest in receiving financial information about a business because they have a ‘stake’ in it.

Stock – A word with two different meanings. It may be used to describe an inventory of goods held for resale or for use in business. It may also be used to describe shares in the ownership for a company. The meaning will usually be obvious from the way in which the word is used.

Turnover – The sales of a business or other form of revenue from operations of the business.

Work-in-progress – Cost of partly completed goods or services, intended for completion and recorded as an asset. Akin to stocks.