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Glossary

Reference · 30 terms · each entry points to the chapter that works it through

Each definition here is deliberately one line. The chapter reference is the useful part: a term in accounting rarely means anything on its own, and almost always means something precise once you can see what it sits next to.

Table 1. Terms used in this manual, A to Z
Term	In one line	Worked through in
Accounting equation	Assets equal liabilities plus capital: what is held, and where it came from.	Chapter 6
Accrual	A cost or income recognised in the period it belongs to, before the money moves.	Chapter 7
Assets	Resources the business controls, from cash and stock to equipment and amounts owed to it.	Chapter 6
Balance sheet	A statement of what is held and owed at one specific date.	Chapter 8
Capital	The owner's stake: what would remain after every outside claim was met.	Chapter 6
Cash basis	Recording income and costs when money moves rather than when the activity happens.	Chapter 7
Cash flow statement	A statement separating cash from trading, from financing and from asset purchases.	Chapter 8
Chart of accounts	The list of accounts a business uses to classify its entries.	Chapter 5
Credit	An entry on the right of an account; it increases income, liabilities and capital.	Chapter 6
Debit	An entry on the left of an account; it increases assets and expenses.	Chapter 6
Depreciation	Spreading the cost of a long-lived asset across the periods that use it.	Chapter 7
Double entry	Recording both sides of every transaction, so the books carry their own check.	Chapter 5
Gearing	How much of the business is funded by borrowing rather than by its owner.	Chapter 9
Gross margin	Gross profit as a share of sales: whether the trade itself pays.	Chapter 9
Incidence	Who actually ends up worse off from a tax, as opposed to who hands the money over.	Chapter 2
Income tax	A charge on what a person or business received in a period, after allowed deductions.	Chapter 2
Ledger	Where entries are gathered account by account, after the book of first entry.	Chapter 5
Liabilities	Amounts owed to people outside the business.	Chapter 6
Payroll charge	A contribution levied on wages, usually split between employer and employee.	Chapter 2
Prepayment	Something paid now that relates to a later period, held back from this one.	Chapter 7
Profit and loss account	A statement of whether trading over a period created more than it consumed.	Chapter 8
Property tax	A charge on the value or rental worth of land and buildings.	Chapter 2
Reconciliation	Comparing the books against an independent record, such as a bank statement.	Chapter 7
Source document	The original evidence of a transaction: an invoice, receipt or statement.	Chapter 5
Tax year	The period a tax system uses to cut continuous activity into measurable slices.	Chapter 4
Trial balance	A list of every account balance, with debits and credits totalled separately.	Chapter 6
Value-added tax	A consumption tax collected in stages, each business reclaiming tax on its purchases.	Chapter 2
Wealth-transfer tax	A charge on gifts and estates passing from one person to another.	Chapter 2
Withholding	Deducting tax before payment is made, rather than collecting it later.	Chapter 3
Working capital	Money tied up between paying for things and being paid for them.	Chapter 9