Abbreviated accounts, formerly known as modified accounts, are simplified financial statements that small companies in certain jurisdictions can file instead of full statutory accounts.
Above-the-line entries refer to those listed above the horizontal line on a company's profit and loss account, reflecting normal business activities. This accounting practice is critical for understanding how a company's earnings are generated.
A profession regulated by accountancy bodies that oversees the activities of accountants, encompassing the process of accounting.
Organizations, established worldwide, to regulate the activities of accountants. Members are entitled to use various professional titles such as Chartered Accountant, Chartered Certified Accountant, or Certified Public Accountant. Membership is controlled by examination, and compliance with the body's regulations is expected.
An Accountant's Opinion is a statement signed by an independent Certified Public Accountant that describes the scope of the examination of an organization's books and records. It provides important assurance to lenders or investors.
A comprehensive report prepared by accountants that includes financial information, often required to be included in a company's prospectus as mandated by the London Stock Exchange.
An overview of basic theoretical ideas devised to support the activity of accounting. These concepts form the fundamental principles needed for producing comparable, relevant, reliable, and understandable financial information.
The Accounting Council is a body established to provide advice on accounting and financial reporting policies, aiding the Financial Reporting Council (FRC) in the development of Financial Reporting Standards.
An accounting cushion refers to the practice of recording larger provisions for expenses in one fiscal year to minimize expenses in future years. This practice results in understated earnings for the current period but overstates earnings in subsequent periods.
The accounting cycle is the sequence of steps in accounting for a financial transaction entered into by an organization. It involves recording transactions in the books of account and aggregating them in financial statements for a financial period.
The Accounting Directive (2014/95/EU) aims to simplify the disclosure requirements for small companies, notably through the introduction of abridged accounts, and includes special rules for micro-entities. The directive was incorporated into UK law in 2015 and applies to financial periods beginning on or after 1 January 2016.
Accounting policies are the specific principles, bases, conventions, rules, and practices applied by an entity in preparing and presenting financial statements. They ensure consistency, transparency, and comparability of financial reporting.
Accounting principles are the fundamental rules, concepts, and guidelines governing currently accepted accounting practices and procedures. They form the foundation upon which financial transactions are recorded and reported, ensuring consistency, reliability, and comparability of financial statements.
Accounting principles are the foundation rules and guidelines that companies must follow when reporting financial data, ensuring consistency, transparency, and comparability of financial statements.
An accounting procedure is the specific accounting method that a company uses to handle routine accounting matters. These procedures may be written in a manual to assist new employees in learning the system.
Formerly known as the Financial Reporting Release, Accounting Series Releases (ASRs) were publications by the U.S. Securities and Exchange Commission (SEC) that discussed policies and procedures related to financial reporting and accounting standards in the USA.
Programs used to maintain books of account on computers. The software can be used to record transactions, maintain account balances, and prepare financial statements and reports. Many different accounting software packages exist.
A definitive set of criteria used to guide financial accounting and reporting practices globally, formulated by various authoritative bodies such as FASB, IASB, and FRC.
The Accounting Standards Board (ASB) was the recognised body for setting accounting standards in the UK from its establishment in 1990 until its functions were subsumed under the Financial Reporting Council (FRC) in 2012.
The Accounting Standards Committee (ASC) was a joint committee established in 1976 to create and issue accounting standards in the UK. It was later replaced by the Accounting Standards Board (ASB) due to concerns about its effectiveness.
An accounting system is designed to record, categorize, and report the financial transactions and events of a business in compliance with its policies and procedures.
An EU directive (2003) requiring companies to publish comprehensive information on their financial and non-financial performance, including environmental and employee matters.
The accruals concept is a fundamental accounting principle that requires revenue and costs to be recognized as they are earned or incurred, rather than when money is received or paid. This concept ensures that income and expenses are matched with one another in the correct accounting period.
Accrued benefits refer to the benefits that are due under a defined-benefit pension scheme in relation to the service rendered by an employee up to a specific date. These may be calculated based on current earnings or protected final earnings, and are governed by various regulatory standards depending on the jurisdiction.
An actuarial method used in accounting for pension costs that calculates the actuarial value of liabilities based on current and deferred pensioners' benefits as well as the benefits of current employees for services rendered up to a given date.
Accrued depreciation refers to the total amount of depreciation that has been recorded for an asset up to a specific point in time, reflecting the reduction in value due to wear and tear, obsolescence, or other factors.
Accrued income, also known as accrued revenue, is income that has been earned during an accounting period but has not yet been received by the end of the period. It adheres to the accruals concept and is vital for accurate financial reporting.
Accrued taxes represent the amount of taxes owed, based on income earned or property value assessment, but not yet paid. This concept plays a crucial role in accounting, taxation, and financial reporting.
Acquired Goodwill refers to the goodwill purchased when an entity is acquired, distinguishing it from internally generated goodwill. It arises when the purchase cost exceeds the fair values of the identifiable assets and liabilities.
An accounting process that involves allocating the purchase consideration's fair value between the underlying tangible and intangible net assets of a company being acquired.
Adjusting entries are made at the balance-sheet date under an accrual accounting system to ensure that the income and expenditure of a business are included in the correct period. Examples include adjustments for depreciation, prepayments, accruals, and closing stock.
Adjusting events, also known as post-balance-sheet events, occur between the balance-sheet date and the date on which financial statements are approved, providing additional evidence of conditions existing at the balance-sheet date.
All-purpose financial statements, also referred to as general purpose financial statements, are prepared with the objective of providing financial information that is useful to a wide range of users in making economic decisions.
Allowance for depreciation refers to the reduction in the book value of a fixed asset due to wear and tear, age, or obsolescence. It is an accounting term that allows businesses to allocate the cost of an asset over its useful life.
Amalgamation is the combination of two or more companies into a single entity, either by acquisition, merging, or dissolution and reconstitution as a new company.
Amortization is the process of gradually writing off the initial cost of an asset over a specific term or the repayment of debt in installments.
The Accounting Standards Committee (ASC) is a significant entity responsible for establishing and maintaining accounting standards to ensure consistency, transparency, and reliability in financial reporting.
Asset classification refers to the systematic categorization of assets on a balance sheet, distinguishing between fixed and current assets as mandated by the Companies Act and Financial Reporting Standard (FRS 102) in the UK and Republic of Ireland.
An adjustment to the book value of an asset to reflect its current market value; seldom allowed under Generally Accepted Accounting Principles (GAAP).
An assets register, commonly referred to as a fixed-assets register, is a detailed ledger used by organizations to track and manage their fixed assets, including the acquisition, depreciation, and disposal of these assets.
Attributable profit is the portion of the total estimated profit from a long-term contract, reflecting the fair share of work completed, minus estimated remedial, maintenance, and other non-recoverable costs at a specific accounting date.
The Audit and Assurance Council is a body established in 2012 to advise the Financial Reporting Council on matters related to audit and assurance, including the issuance of codes and standards. Unlike its predecessor, the Auditing Practices Board, the Council has a more limited and purely advisory role.
In public companies, a committee of non-executive directors that is responsible for oversight of financial reporting, internal and external audits, compliance with regulatory codes, and risk management. This committee enhances accountability, auditor independence, and public confidence.
An audit completion checklist is a crucial tool used by audit staff to ensure that the financial statements being audited provide a true and fair view in compliance with statutory disclosures and accounting standards.
Audit rotation refers to a regulatory or policy requirement that mandates the periodic changing of an audit firm or auditor for a company to maintain the audits' objectivity and independence.
A comprehensive series of documents providing guidance on the application of auditing standards, originally issued by the Auditing Practices Committee (APC) and subsequently adopted by the Auditing Practices Board (APB).
The Auditing Practices Committee (APC) develops auditing standards and guidelines that ensure effective audit practices in accordance with legal and regulatory requirements.
An auditors' report provides an independent opinion on the fairness and accuracy of a company's financial statements, central to ensuring transparency and integrity in financial reporting.
An auditors' report, also known as an audit report, is an official opinion issued by auditors appointed to examine the financial statements of a company or organization. The report provides an independent assessment of whether the financial statements present a 'true and fair view' of the company's financial performance and comply with regulatory requirements. It plays a crucial role in ensuring transparency and accountability in financial reporting.
Average costing, also known as weighted average costing, is a method of cost accounting that assigns an average cost to each unit of production when items have a high degree of similarity. It is useful for inventory management and financial reporting.
B/F, an abbreviation for 'brought forward,' refers to an accounting practice where balances from a previous period are carried over to the current period, ensuring continuity in financial reporting. This term is crucial for maintaining accurate financial records year-over-year or across accounting periods.
Backlog depreciation refers to the additional depreciation charge that occurs when an asset is revalued, causing an increase in accumulated depreciation.
Bad debt refers to an amount owed by a debtor that is unlikely to be recovered, such as when a company goes into liquidation. The full amount should be written off to the profit and loss account of the relevant period or to a provision for bad debts upon identification, in line with accounting prudence principles.
The value of an asset as represented on the balance sheet, detailing how various types of assets are recorded considering depreciation, amortization, and valuation methods like fair value accounting.
Balance-Sheet Total refers to the total net worth of an organization, encompassing both fixed and current assets minus long-term liabilities. It is an important metric in financial reporting and is particularly relevant in the qualification criteria for small and medium-sized company exemptions.
A Bank Report is a document generated by a banking institution at the request of an auditor to provide detailed information regarding a business's transactions and interactions with the bank over a specified period.
The Basis Period is a critical concept in accounting and taxation, referring to the specific period, usually a fiscal year, during which income generated or profits earned are used as the basis for assessing tax liabilities for the following tax year.
The term 'Beginning of Year' (BOY) is commonly used in financial analysis and reporting to indicate the start of a fiscal year. In accounting, it acts as a reference point for comparing year-over-year performance and financial statements.
Big GAAP refers to the generally accepted accounting principles (GAAP) applied to large entities. It encompasses a comprehensive set of accounting standards used globally to ensure consistency, reliability, and transparency in the financial statements of large corporations.
Biological assets are living plants or animals, such as trees in a plantation or orchard, cultivated plants, sheep, and cattle. The term was introduced in International Accounting Standard (IAS) 41, Agriculture, which became operative from January 1, 2003. The rules for the accounting treatment of biological assets are set out in Section 34 of the Financial Reporting Standard applicable in the UK and Republic of Ireland.
Book depreciation, also known as accounting depreciation, refers to the allocation of the cost of tangible assets over their useful lives, reflecting the wear and tear, deterioration, or obsolescence of these assets.
A Book of Account refers to the formal record maintained by a business entity to document its financial transactions. These records are essential for bookkeeping and accounting, ensuring that all financial activities are accurately tracked and reported. Books of account typically include journals, ledgers, and other financial documents that reflect the business's financial performance and position.
Book profit or loss, also known as accounting profit or loss, is the net income or deficit as recorded in the financial statements of a company before accounting for any unrealized gains or losses.
A business bad debt is a debt that arises from the operations of a taxpayer's trade or business and has become worthless. Identifying and properly handling bad debt is crucial for accurate financial reporting and tax deductions.
Separately identifiable parts of the business operations of a company or group whose activities, assets, risks, and returns can be clearly identified. Companies are obliged to disclose in their annual report and accounts certain financial information relating to these business segments.
A Comprehensive Annual Financial Report (CAFR) is a detailed presentation of a state, municipality, or other governmental entity's financial condition. It can serve various stakeholders, including citizens, governing bodies, investors, and creditors.
A calendar year refers to a continuous period beginning on January 1 and ending on December 31, widely used for financial and accounting purposes. In contrast, a fiscal year can vary depending on the organization's specific reporting requirements.
Understanding the financial and physical capital maintenance concepts helps ensure that a company's capital is preserved, facilitating accurate performance measurement over time.
CASE is an acronym for the Committee on Accounting for Smaller Entities. This organization focuses on the creation and adaptation of accounting standards and practices to better suit the needs of smaller entities, ensuring that they are adequately represented and that their financial reporting is manageable and effective.
An accounting method where transactions are recorded only when cash is received or paid. This method does not account for debtors, prepayments, creditors, accruals, stocks, and fixed assets.
Short-term, highly liquid investments that are capable of being converted into known amounts of cash without notice, typically maturing within three months when acquired.
A Cash Flow Statement is a financial document that shows the inflows and outflows of cash and cash equivalents for a business over a financial period. It is a crucial part of financial reporting.
A cash-generating unit (CGU) is a subset of assets, liabilities, and associated goodwill within a reporting entity that contributes to generating cash inflows in a largely independent manner from other parts of the organization.
A 'Change in Accounting Method' refers to an alteration in the overall method of accounting or a change in a material item used in an overall accounting plan. This could involve changes such as switching from cash basis accounting to accrual basis accounting, or altering inventory valuation methods.
Channel stuffing is a practice where a company inflates sales figures by sending more products through distribution channels than retailers can sell, potentially deceiving financial markets if done intentionally.
A chargeable event refers to any transaction or occurrence that results in a liability for income tax, capital gains tax, or corporation tax.
The Charity Commission is the government department responsible for overseeing charities, providing advice, and investigating their operations. Accountable to the Home Secretary and governed by the Charities Act 2011, it issues Statements of Recommended Practice (SORPs) for charity accounting.
The Chief Financial Officer (CFO) is a senior executive responsible for managing the financial actions, planning, and reporting of an organization. This role includes overseeing financial planning, financial risk management, record-keeping, and financial reporting.
A Chief Financial Officer (CFO) is a corporate officer responsible for managing the financial actions of a company, including financial planning, management of financial risks, record-keeping, and financial reporting.
The Canadian Institute of Chartered Accountants (CICA) is a professional body representing chartered accountants in Canada, providing guidance, setting regulatory standards, and promoting the integrity and competence of the profession.
Close family refers to the family members of an individual or members of the individual's household who are expected to influence or be influenced by that person in their dealings, potentially leading to related party transactions.
The value and quantities of stock in trade at the end of an accounting period, used in determining the cost of goods sold during that period.
The Closing-Rate Method, also known as the Net-Investment Method, involves restating balance sheet figures into another currency using the closing rate of exchange for all assets and liabilities as of the balance-sheet date.
Columnar accounts refer to accounts that are organized in multiple columns to present financial information more clearly and systematically. This structure is often used to present a trial balance, facilitating automatic adjustments into financial statements.
In the USA, a combined financial statement involves the aggregation of the financial statements of a related group of entities to present financial information as if the group was a single entity. Intercompany transactions are eliminated from combined financial statements.
An EU directive (2006) designed to enhance public confidence in financial reporting within the EU by increasing the transparency of financial statements and reports.
The accounting principle that financial information for a company should be comparable with financial information for other similar companies, ensuring that stakeholders can make well-informed decisions.
The comparative amount refers to the financial figure reported in a previous period, which is used for comparison with the current period to assess performance and detect trends over time.
Comparative figures are provided in financial statements for previous years of an organization, allowing for comparison and sometimes requiring adjustment if accounting policies have changed.
Financial statements covering different dates but prepared consistently and therefore lending themselves to comparative analysis, as accounting convention requires.
The principle that the financial information provided by a company should not omit anything material, ensuring the financial statements are comprehensive and useful for decision-making.
Compliance in accounting and corporate governance refers to the adherence to laws, regulations, and internal controls that govern an entity's operations, ensuring legal and regulatory obligations are met.
Composite depreciation is a method where a single depreciation rate is applied to an entire asset, despite its components having varying useful lives.
A compound instrument is a financial instrument that contains both an equity element and a debt element. These are complex financial instruments which require careful handling in financial reporting.
A comptroller is a high-level executive who oversees the accounting and financial reporting functions within an organization, often in a governmental or nonprofit entity. The cabinet-level position is usually responsible for ensuring adherence to financial regulations and the accuracy of reported financial data.
A statement of theoretical principles that provides guidance for financial accounting and reporting. It serves as a foundation for setting accounting standards and provides a coherent system of interrelated objectives and fundamentals.
A document setting out the basic accounting concepts informing International Accounting Standards and International Financial Reporting Standards, serving as a guide in the preparation and presentation of financial statements.
A consent letter is a formal document included in a prospectus where an expert, such as a reporting accountant, consents to the issuance of the prospectus and acknowledges the inclusion of their report or any reference made to them.
Conservatism in accounting focuses on understating assets and revenues and overstating liabilities and expenses to provide a prudent and less risky portrayal of a company's financial position. In business, it refers to a cautious and careful attitude, typically avoiding excessive risk. In politics, conservatism promotes limited government spending and lower taxes.
A consolidated cash-flow statement provides a comprehensive overview of cash inflows and outflows from a group of entities, combining individual cash-flow statements subject to various consolidation adjustments for accurate financial reporting.
