Are you looking for an accountant, but you don’t understand anything they say? No worries!
Accounting terminology is just the set of words we use to describe how money moves through your business. It’s the language behind your invoices, your bookkeeping system, and the numbers you see in your reports. Most of it sounds more complicated than it really is.
You’re not expected to know all these terms or understand every line in your accounts. That’s what your accountant is for. If you ever feel unsure about something you’re reading or hearing, your best move is simply to ask – you can contact us for free, too.
WallsMan Creative works exactly this way. We explain everything in plain English, without the jargon, so you always know what’s happening in your finances and why it matters.
A – B – C – D – E – F – G – H – I – L – M – N – O – P – R – S – T – U – V – W – Y – Z
A
1. Assets
Assets are the things your business owns that have value. This includes cash, equipment, stock, and anything else you could use or sell to support your work.
A common abbreviation for assets is: A
2. Accounts payable
Money you owe to suppliers for goods or services you’ve already received. It’s basically your unpaid bills that still need settling.
A common abbreviation for accounts payable is: AP
3. Accounts receivable
Money owed to your business by clients or customers. These are invoices you’ve sent but haven’t been paid for yet.
A common abbreviation for accounts receivable is: AR
4. Accounting period
The specific stretch of time your financial activity covers. This could be a month, a quarter, or a full year, depending on how your accounts are set up.
5. Accruals →
Expenses or income that relate to this period but haven’t been paid or received yet. They make sure your numbers reflect what actually happened, not just what was paid.
6. Amortisation
The gradual spreading of a cost over a set period, usually for intangible assets like software or licences.
A common abbreviation for amortisation is: AMT
7. Audit
An independent check of your financial statements to confirm they’re accurate and follow the required rules.
B
8. Balance sheet
A snapshot of what your business owns, what it owes, and what’s left over at a specific point in time. It shows your overall financial position in one place.
A common abbreviation for balance sheet is: BS
9. Bookkeeping
The daily process of recording all the money coming in and going out of your business. It keeps your financial records tidy and up to date.
10. Budget →
A simple plan showing how much money you expect to earn and spend over a set period. It helps you stay in control of cash flow.
In the UK, it could also refer to the Chancellor’s annual tax-and-spending plan, known as the national budget.
11. Business expenses
The costs you incur while running your business, like software, travel, equipment, or freelance support.
12. Break-even point
The moment where your income covers your costs. You’re not making a profit yet, but you’re no longer operating at a loss.
A common abbreviation for break-even point is: BEP
13. Bad debt
Money you’re owed but unlikely to collect, usually because a customer can’t or won’t pay.
C
14. Capital
Money invested into the business by you or other owners. It’s what gets the business started and helps it grow.
15. Cash flow →
The movement of money in and out of your business. Positive cash flow means you have more coming in than going out, which keeps things stable.
16. Chart of accounts
A structured list of all the categories you use to record your financial transactions. It keeps your bookkeeping organised.
A well-known abbreviation for chart of accounts is: COA
17. Cost of goods sold
The direct costs involved in producing your products or delivering your services. It helps you calculate your real profit.
A well-known abbreviation for cost of goods sold is: COGS
18. Credit
An entry that increases income or liability accounts and decreases asset accounts. In everyday terms, it’s the opposite of a debit.
A well-known abbreviation for credit is: CR
19. Current assets
Assets you expect to use, sell, or convert into cash within a year, like stock or amounts owed to you.
A well-known abbreviation for current assets is: CA
20. Current liabilities
What your business needs to pay within a year, like short-term loans, supplier bills, and taxes due.
A well-known abbreviation for current liabilities is: CL
21. Corporation tax →
A tax your company pays on its profits.
A well-known abbreviation for corporation tax is: CT
D
22. Debit
A debit is an entry that increases asset accounts and reduces income or liability accounts. In simple terms, it tracks value coming into the business.
A well-known abbreviation for debit is: DR
23. Depreciation
The gradual loss of value of an asset over time, usually because of wear, use, or age. It spreads the cost so it matches how long the asset lasts.
24. Director’s loan account
A record of money you take out of the company or put into it as a director. It tracks what the company owes you – or what you owe the company.
A well-known abbreviation for director’s loan account is: DLA
25. Dividends →
Payments made to you as a shareholder from the company’s profits. It’s one way to take income from a profitable business.
26. Drawings
Money you take out of the business for personal use if you’re a sole trader. It’s not a business expense, it’s your own withdrawal.
E
27. Equity
The value left in your business after you subtract everything the business owes from everything it owns. It’s your share of the business.
28. Equity accounts
The accounts that track owner investment, retained profits, and withdrawals. They show how the value of the business changes over time.
29. Expenses
The everyday costs of running your business, from software and supplies to travel and subscriptions.
A well-known abbreviation for expenses is: EXP
30. Expenses incurred
Costs you’ve built up during a period, even if you haven’t paid them yet. They help match your spending to the right timeframe.
31. Employer National Insurance
A social tax your company pays when you employ staff. It’s separate from the employee’s own National Insurance. (We also have a National Insurance Calculator on our site.)
A well-known abbreviation for Employer National Insurance is: ER NI
F
32. Fixed assets
Long-term items your business owns and uses for more than a year, like computers, furniture, or machinery. They’re not meant for resale, they help you run the business.
A well-known abbreviation for fixed assets is: FA
33. Financial statements
The core reports that show how your business is doing: usually the balance sheet, profit and loss, and cash flow statement.
A well-known abbreviation for financial statements is: FS
34. Financial year
The 12-month period your accounts cover for reporting and tax. It doesn’t always match the calendar year.
A common abbreviation for financial year is: FY
35. Financial reporting
The process of preparing and presenting financial information so you can understand how the business is performing.
36. Forecast →
An estimate of your future income and expenses, based on what you know now. It helps you plan ahead and avoid surprises.
37. Future economic benefit
The value you expect to gain from an asset over time. It’s why assets are recorded on your balance sheet.
G
38. General ledger
The main record of all your financial transactions. Every sale, cost, and adjustment is stored here before reports are created.
A well-known abbreviation for general ledger is: GL
39. Gains or losses
The extra money you make or lose from activities outside your normal trading, like selling an asset for more or less than its value.
40. Gross profit →
Your income minus the direct costs of producing your goods or delivering your services. It shows how much you earn before overheads.
A well-known abbreviation for gross profit is: GP
41. Goods or services
What your business sells. Goods are physical items; services are your time, skills, or expertise.
42. GAAP
A set of standard accounting rules that guide how financial information should be recorded and presented.
A well-known abbreviation for generally accepted accounting principles is: GAAP
H
43. HMRC →
The UK government department that collects taxes and oversees compliance for businesses and individuals.
A well-known abbreviation for HM Revenue & Customs is: HMRC
44. Hire purchase
A way of buying an asset by paying for it in instalments. You get to use the asset straight away, but full ownership only transfers after the final payment.
A common abbreviation is: HP
45. Historical cost
The original price you paid for an asset. It’s often used in accounts even if the asset’s market value changes later.
I
46. Income
Money your business earns from selling goods or providing services. It’s the starting point for working out profit.
A well-known abbreviation for income is: INC
47. Inventory
Items you hold for sale, or materials you’ll use to produce what you sell. It counts as an asset until it’s sold.
A well-known abbreviation for inventory is: INV
48. Invoice
A document you send to a customer asking for payment. It shows what you sold, the price, and when the money is due.
A well-known abbreviation for invoice is: INV
49. Insolvency
When a business can’t pay its debts as they fall due. It’s a legal and financial warning sign.
50. Interest
The extra amount you pay when borrowing money, or earn when lending it.
L
51. Ledger
The organised record of all your financial transactions. It groups entries by type so you can track activity clearly.
52. Liability
Money your business owes to others. This includes loans, unpaid bills, and taxes due.
A well-known abbreviation for liability is: LIAB
53. Limited company
A business structure where the company is legally separate from you. It protects your personal assets and has its own tax obligations.
A well-known abbreviation for limited company is: Ltd
54. Loan
Money borrowed by your business, usually repaid with interest over time.
55. Loss
When your costs are higher than your income for a period. It’s the opposite of profit.
M
56. Management accounts →
Regular internal reports that show how your business is performing during the year. They help you make decisions without waiting for year-end accounts.
A common abbreviation for management accounts is: MAs
57. Margin
The percentage of profit you make after covering your direct costs. It shows how efficiently you turn income into profit.
58. Materiality
An accounting idea that focuses only on information that would genuinely affect decisions. Small, insignificant amounts don’t need heavy treatment.
59. Mortgage
A long-term loan used to buy property. The property usually acts as security for the loan.
60. Motor expenses
Costs related to using a car for business purposes, such as fuel, insurance, and repairs.
N
61. Net income →
The profit your business makes after all costs, taxes, and expenses are deducted. It’s the number that shows what you actually keep.
A well-known abbreviation for net income is: NI
62. Net assets
What’s left after subtracting everything your business owes from everything it owns. It reflects the true value of the business.
A common abbreviation for net assets is: NA
63. Nominal ledger
Another name for the general ledger. It’s the central place where all your accounting entries are stored and organised.
64. Non-current assets
Long-term assets that you plan to use for more than a year, like equipment or property. They support your business over time rather than being sold quickly.
A common abbreviation for non-current assets is: NCA
65. Notes to the accounts
Extra explanations that sit alongside your financial statements. They add clarity, context, and detail where needed.
O
66. Operating expenses
The everyday running costs of your business, such as rent, software, insurance, and admin. These keep the business functioning but aren’t tied to producing a specific product or service.
A common abbreviation for operating expenses is: OPEX
67. Opening balance
The amount in an account at the start of a new accounting period. It carries over from the previous period’s closing balance.
68. Overheads
The costs you must pay to keep the business going, regardless of how much you sell. This includes things like utilities, office costs, and subscriptions.
69. Output tax
The VAT you add to your sales when you’re VAT registered. You collect it from customers and pay it to HMRC.
P
70. Payroll →
The total pay you give to employees, including wages, salaries, bonuses, and taxes you withhold and pass on to HMRC.
71. Petty cash
A small amount of cash kept on hand for minor business expenses, like postage or quick supplies.
72. Prepayments
Costs you’ve paid in advance for something you’ll use later, such as insurance or software subscriptions.
73. Profit
What’s left after taking away all your costs from your income. It’s the simplest measure of how well the business is doing.
74. Profit and loss statement
A report showing your income, costs, and final profit over a specific period. It tells you if you’re making money or losing it.
A common abbreviation for profit and loss statement is: P&L
75. Provision
Money you set aside for a future cost that’s likely but not yet certain, such as a legal fee or a refund obligation.
76. Purchase invoice
A document you receive from a supplier asking for payment. It records what you bought and how much you owe.
R
77. Receivables
Money owed to your business for work you’ve already delivered. It becomes an asset until the customer pays you.
A common abbreviation for receivables is: REC
78. Retained earnings
Profits your business has built up over time that haven’t been paid out as dividends. They stay in the company to support future growth.
A well-known abbreviation for retained earnings is: RE
79. Reconciliation
The process of checking that two sets of records match, usually your bank statements and your accounting system. It keeps your books accurate.
80. Revenue
The total amount your business earns from sales before any costs are taken away. It’s the top line of your financial performance.
A common abbreviation for revenue is: REV
81. Running costs
Ongoing costs you need to keep the business operating, such as rent, utilities, and subscriptions.
S
82. Sales
The money you earn from selling your goods or services. It’s the starting point for measuring performance.
83. Sales taxes
Taxes added to your sales that you collect from customers and pass on to HMRC, such as VAT.
84. Share capital →
The money invested into the company by its shareholders in exchange for shares. It represents ownership.
85. Shareholder
A person who owns shares in a company and has a claim on part of its profits.
86. Sole trader →
A business structure where you and the business are legally the same. You keep all the profits but also carry all the risks.
87. Statement of financial position
A formal name for the balance sheet. It shows what the business owns, what it owes, and the value left over.
A common abbreviation for statement of financial position is: SFP
88. Subsistence
Costs for food and drink while travelling for business. It’s only allowable in certain situations.
89. Suspense account
A temporary account used when a transaction doesn’t yet have a clear place in your records. It gets cleared once the entry is identified.
T
90. Tax owed
The amount of tax your business must pay to HMRC for the period. It can include corporation tax, VAT, and payroll taxes.
91. Trial balance
A report that checks whether your total debits equal your total credits. It helps confirm your books are in balance before producing financial statements.
A well-known abbreviation for trial balance is: TB
92. Turnover
Another word for total sales. It shows how much money your business brought in before any costs were deducted.
93. Trade creditors
Suppliers you owe money to for goods or services you’ve already received.
94. Trade debtors
Customers who owe you money for goods or services you’ve already delivered.
95. Transactions
Every movement of money in or out of your business. Sales, purchases, refunds, wages, and payments are all transactions.
U
96. Undeposited funds
Money you’ve received but haven’t yet moved into your bank account. It sits in this account until it’s deposited.
97. Unrealised gain
An increase in the value of an asset you haven’t sold yet. The gain isn’t final until the asset is actually sold.
98. Unrealised loss
A decrease in the value of an asset you still hold. Again, it only becomes final when the asset is sold.
99. Utility costs
Essential services you pay for, such as electricity, water, gas, and sometimes internet.
V
100. VAT →
A tax added to most goods and services you sell. If you’re VAT registered, you collect it from customers and pay it to HMRC.
A well-known abbreviation for Value Added Tax is: VAT
101. Variable costs
Costs that rise or fall depending on how much you produce or sell. Materials, packaging, and some labour costs often fall into this group.
102. Vendor
A supplier you buy goods or services from.
103. Void transaction
A transaction that has been cancelled and therefore doesn’t affect your accounts.
W
104. Wages
Regular payments you make to employees for their work. This includes any tax or National Insurance you need to withhold.
105. Write-off
When you remove an amount from your accounts because it’s no longer recoverable or valuable, such as a bad debt or damaged stock.
106. Working capital
The money your business has available for day-to-day operations. It’s your current assets minus your current liabilities.
A common abbreviation for working capital is: WC
107. Withholding tax
Tax taken from certain payments before the money reaches the recipient. It’s collected at the source.
Y
108. Year-end
The end of your accounting period, when your books are closed and your financial statements are prepared.
109. Yield
The return you earn on an investment, usually shown as a percentage.
Z
110. Zero-rated sales
Sales that are taxed at 0% VAT. They’re still VAT-reportable, but no VAT is charged to the customer.
111. Zero-balance account
An account that ends with no money left in it after all transactions for the period are recorded.
When you should ask for help
If any of these terms feel unclear or you’re not sure how they apply to your business, reach out!
WallsMan Creative works with creative businesses and sole traders across the UK. We offer calm, jargon-free guidance that helps you stay confident and in control of your numbers. (If you don’t believe it, just check our 5-star reviews on Google!)
