Bookkeeping terms and definitions can be confusing.  Especially the debits and credits.  Accountants and bookkeepers, like many tradespeople and professionals use jargon. Sometimes we get so used to it that, again like other business people, we forget it’s jargon.  So if you’re wondering what it all means, maybe this will help.

Bookkeeping is done (or should be) by any type of business, charity, company and organisation. The words organisation, company and business are used interchangeably in this post, just because I get bored typing the same word repeatedly.

List of Bookkeeping Terms

Amortisation	Similar to depreciation, but applied to intangible assets
Balance Sheet	A financial snapshot of your organisation’s assets (things you own and money owed to you)and liabilities (money you owe to others), at a   particular date, prepared under UK accounting rules.
Bookkeeping	recording, organising and filing financial documents. Does not include preparing accounts, tax computations or tax returns.
Capital	This can have several meanings. Capital expenditure is money spent on fixed assets. Capital introduced is money input to a business by owners, investors, or shareholders etc. Working capital is the excess of current assets minus   current liabilities, or the amount of cash available to run your business.
Credit	A credit is the opposite of a debit.
Creditors	People and organisations you need to pay in the future.
Current Assets	Stock, bank balances, amounts due to your company within one year. Assets  that are not long-term features of your business, and can be coverted to cash relatively quickly.
Debit	A debit decreases your profit/surplus, or increases the assets on your balance sheet (statement of financial position).
Debits and credits	The 2 sides of double-entry bookkeeping.  In   your accounts, think of it as the opposite of what you see on your bank  statement (ie. A credit in your bank account, will be a debit in your accounts). This is because the bank statement shows debits and credits from the bank’s point of view, not yours.
Debtors	People and organisations that owe your company money. These are assets to your company.
Depreciation	A proportion of the cost of a tangible asset, deducted from profit over a  number of years. The idea is to spread the cost of the asset over the period that it is used in running the business. Eg. A machine expected to last 5 years would be recorded as an asset, then written off to the P& account (deducted from profit) over 5 years.
Double-entry bookkeeping	Recording the full nature of a transaction. For example, if you buy pens   for £5.00 cash, the first bookkeeping entry is to increase your costs by £5.00 (the debit entry), the second is to decrease your petty cash balance by £5.00 (the credit entry).
Fixed Assets	Tangible or intangible property belonging to the business, and used to run the business activities.
Goods	Items bought and sold.
Goodwill	A value in incorporated companies that represents the value of the   company over and above the net value of assets minus liabilites, ususally   arising when a company is bought by another.
Income statement	Equivalent to a P&L account, but compiled under different accounting   rules.
Intangible asset	Something the organisation owns, but is not a physical item eg. A patent,   goodwill.
Liabilities	Amounts owing to third parties, current liabilities are due within 12   months of the balance sheet date.
National Insurance	Let’s face it, it’s just another tax.
Profit and loss account	AKA P&L account. A statement of your income (sales, grants received   etc.), less costs and expenses, showing your profit for a particular period of time. Prepared under UK accounting rules.
Statement of Financial Position	Equivalent to a balance sheet, but compiled under different accounting   rules.
Stock	Items bought for resale, but not yet sold.
Tangible asset	An asset with physical substance, eg. Stock for resale, money in a bank   account, buildings, machinery, equipment etc.
Tax	Money you, and/or your company, have to pay even though you don’t want to.
Third party	A person or organisation not connected to your own organisation.
Transaction	An exchange of goods, services, money etc. with a third party, eg selling   a chair for cash is one transaction, selling a chair on credit is one   transaction, receiving a cheque for the credit sale is another transaction.
UTR	Unique taxpayer reference.  A 10   figure number used by HM Revenue and Customs to identify the tax record of an individual (self-assessment tax system) or business.
Working capital	The amount of money available to your business. Current assets less   current liabilities.
Written off	Deducted from profit