Abridged accounts are a simplified form of annual accounts allowed under the EU Accounting Directive (2014) for entities qualifying as small companies. These accounts exclude certain detailed financial information from both the balance sheet and profit and loss statement, provided this exclusion is unanimously agreed upon by shareholders.
An accrued expense is a cost that has been incurred but not yet paid. These are obligations that a company must pay out in the future for services or goods that have already been received.
A business plan is a comprehensive guide that outlines a company's goals, strategies, and financial projections, essential for both new ventures and established businesses seeking capital or strategic direction.
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.
Common-size financial statements are a method of analyzing and comparing financial statements by expressing individual elements as percentages of the total. This allows for easier comparison across companies and industries.
Discontinued operations refer to components of a business that have been sold or permanently closed down, and their financial results are separated from continuing operations for reporting purposes.
A Disposals Account is used in accounting to record the removal of a fixed asset from the ledger, capturing its original cost, accumulated depreciation, and the amount received upon disposal.
A financial period, also known as an accounting period, is a specific timeframe within which financial performance is measured and reported for both businesses and individuals. This span is essential for preparing periodic financial statements and evaluating profitability, financial position, and cash flows.
The gross equity method is a way of accounting for associated undertakings whereby the investor displays its proportionate share of the investee's aggregate gross assets and liabilities on the balance sheet. Additionally, the related share of turnover is noted in the profit and loss account.
An important accounting practice designed to manage the impact of volatile financial instruments on a company's profit and loss account through the use of financial derivatives to hedge against risk.
In accounting, income accounts refer to revenue and expense accounts that reflect transactions affecting profit or loss during the accounting period. Unlike balance sheet accounts, income accounts provide insight into the organization's operational performance.
Interim financial statements are financial reports issued for periods shorter than a full fiscal year, often used by companies to report on financial health and performance at interim intervals.
The master budget is the final coordinated overall budget for an organization, which includes functional budgets, the capital budget, the cash-flow budget, and the budgeted profit and loss account and balance sheet for a specific period.
MACRS is a depreciation system in the USA designed to encourage capital investment by businesses. It enables a quicker recovery of an asset's cost by allowing greater depreciation deductions in the earlier years of an asset's life.
The net basis is the method used to calculate a company's earnings per share (EPS), incorporating both constant and variable elements in the company's tax charge. Under International Accounting Standard 33, listed companies must display EPS on the net basis in their profit and loss statements.
A preliminary announcement is an early notification of a company's yearly profit or loss, primarily mandated for listed companies under the London Stock Exchange Regulations. This announcement usually includes summarized profit and loss accounts and can extend to balance sheets.
A PV chart graphically displays the relationship between profits, losses, and different levels of business activity, highlighting the breakeven point and fixed costs.
The prudence concept is an accounting principle that mandates a realistic view of business activity, emphasizing the inclusion of anticipated revenues and profits in the profit and loss account only upon realization.
A trading loss arising in a current accounting period as a result of computing the profits and losses of an organization in accordance with accepted corporation-tax principles.
Realized profit or loss refers to the profit or loss that has arisen from a completed transaction, typically the sale of goods, services, or other assets. It is recognized legally once the transaction is finalized, regardless of whether cash has been received.
Red ink is a slang term often used to describe financial losses, especially highlighted in financial statements where losses are marked in red for quick identification.
A statement that provides a reconciliation of the beginning and ending balances in the retained earnings account on a company's balance sheet.
Revenue is the total income generated by an entity from its main operating activities. It is a key indicator of financial performance and forms the base upon which profit and loss are calculated.
Schedule C is a tax form used by individuals to report income and expenses from a business or self-employed activity.
A method of calculating the amount by which a fixed asset is to be depreciated in an accounting period, using a constant annual depreciation charge against profits year by year.
An entrepreneurial business undertaking involving a degree of risk, where capital is exposed to potential loss in pursuit of profit.
