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Unsure of the difference between cash-flow and capital? Business jargon can often be complicated, especially if you’re just getting started.

Here we’ve compiled a glossary of some often-used business and accounting terms and provided easy to understand definitions, with links to further info where appropriate.


Year end accounts are produced using the “accruals” accountancy concept. At its simplest, this means matching your sales and expenses to the year the work was done.

Accrual journal

An accrual journal is typically an expense which occurred in the next year of trading but which relates to the prior year. It should therefore be included in those accounts to accurately reflect the profit reported for that year of trading.

Accrued expenses

Adjustments to expenses that have been incurred but haven’t been recorded in the accounts yet.

Accrued income

Income that you’ve earned but haven’t recorded in the accounts yet.

Aged Creditors

Aged Creditors is a report which provides a list of the suppliers to whom your business owes money and how old the debt is.

Aged Debtors Report

A report of the customers who owe you money and how old their debt is. This can be used to see how much each customer owes you, along with how much all of your customers owe you at a point in time.


The writing-off of an intangible asset over a period of time. This is based on length of time that the asset will bring in future value into the company. An example of an intangible asset would be a one off franchise fee, purchased customer lists or goodwill.

Annual Return (now replaced by the Confirmation Statement)

A yearly update all UK limited companies were required to submit to Companies House. Since June 2016, this has been replaced with a Confirmation Statement, which is very similar but also contains information about ‘Persons of Significant Control’ (PSC).


An item owned by a business that has monetary value e.g property, cash in the bank, debtors or stock.

Balance sheet (also known as the Statement of financial position)

Lists the assets, liabilities and equity of a business in order to calculate its net worth. Learn more about Balance sheets.

Benefit in Kind

Items which employees or directors receive from their company of employment, but which aren’t included in their salary or wages. Sometimes called ‘fringe benefits’. May often attract a tax charge eg. company cars. Find out more about benefits in kind.


An organisation that trades in goods or services.


Wealth owned by a person or business that is available for reinvestment in the company.

Capital Allowances

Fixed assets which HMRC allow to be taken off the profits of the company before tax is imposed. Capital allowances only apply for certain kinds of assets.


The amount of cash being transferred in and out of a business. Learn more about cash flow.


Check Employee Status for Tax (CEST) is a government tool used to check whether a contractor is inside or outside of IR35.

Close Company

A Close Company is defined as a limited company is with up to five “participators”, a limited company where all the “participators” are also directors of the company. For most small limited companies “participators” are simply the shareholders of the company.

Confirmation Statement

In June 2016 the Confirmation Statement replaced the Annual Return. It essentially contains the same information but will include additional information about ‘Persons of Significant Control’ (PSC).

Contract of services

If a contractor has a “contract of services”, they will generally be recognised as an employee. A contract for services includes details of a contractor’s set work hours at a set location.

Contract for services

If a contractor has a “contract for services”, they will generally be recognised as self-employed. This type of contract will outline which specific services the contractor will offer for a particular project. It won’t outline where or when the contractor will work, unlike a contract of services.


A worker who provides a service to a client for a set fee, for a set period, as opposed to being under employment. If you’re thinking about becoming a contractor, you can download our Starting Out Contracting guide.

Corporation Tax

A tax on the profits of a company which must be paid within nine months of the end of your company’s accounting period. See our articles on small business taxes for more information, you can also find the current tax rates here.

Cost of Sales

Any purchases made in order for a sale to have happened, such as an item that is resold. So, for a restaurant, this would be food and drink, or for a computer repair shop, this would be computer parts.

Credit Note

A credit note is a document sent to a buyer from a seller stating that an amount has been credited to the buyer’s account. Credit notes are usually used to correct mistakes on invoices or to document the fact that a refund has been given. For more information see our article on when to issue a credit note to a client.


A person or other company that is owed money.

Current Assets

Assets that are short-term in nature. Includes cash, bank balances, and assets that you expect to convert into money within a year’s time, such as amounts owed by customers, and trading stock.

Current Liabilities

Amounts owed to other people, which have to be paid within one year.


A person or other company that owes you money.


The writing off of a tangible asset value (such as a computer) over a period of time. This is based on length of time that the asset will bring in future value into the company (also known as its useful economic life).


A person who runs a limited company, often owning shares in the company. Our handy Directors Responsibilities guide helps you understand what is expected of you in this position.

Director’s Loan Account

Any money taken from a company that isn’t salary, dividends or expense repayments or money returned to you that was previously loaned or paid into your company. You need to pay back a director’s loan within nine months of the end of the accounting period in which it was taken. Find out more about Director’s Loan Accounts.

Director’s withdrawals

The amount owed to a director includes any expenses recorded as Director’s Expenses as well as any salary and dividend payments recorded.

Disguised employment/employee

A contractor who performs an employee-like job, but doesn’t pay the Income Tax or National insurance Contributions that an employee pays. The government is trying to stop this through their new IR35 rules.


Dividends are payments made to company shareholders from the profits of the company after Corporation Tax. Read more about dividends and what tax you pay on them.


A person who works for wages or salary in a business.


A person who employs people and pays them a wage or salary.

Employers’ Liability Insurance

An Insurance policy that covers costs that arise from claims made by any of your employees while at work. More info in our article ‘What is Employers’ Liability Insurance’?

Employment language

Terms such as “hours of work” or “Line manager”, which clearly indicate you are an employee. Employment language is a key part of identifying whether your contract is inside or outside IR35.

Exclusive service

If a contractor enters an exclusive service, they will be unable, or not have the right, to take on another client.

First Accounting Year End Date

The end date of the company’s first accounting year. For limited companies, this is usually one year after company formation (at the end of that month). You may find our year end accounts checklist useful.

Financial forecasts

A calculated estimation of future financial outcomes for a business. Find out more about cashflow forecasts.

Fixed Assets

Items that bring in economic value to the business for a period longer than one year.


A business license granted by a company that enables a party (franchisee) to market its products or services. For example, Ben and Jerry’s is the company and the parlours where you buy ice-cream are a franchise.


Stands for ‘General Data Protection Regulation’. Introduced across the EU on May 25th 2018. To find out how this affects you, see our article ‘What is GDPR?

Intangible Assets

Things a business owns that you can’t touch, for example, trademarks or other intellectual property.

Interim Accounts

These display your year-end documents as if today was the end of your financial period. In other words, they show your company’s financial position as of a specific date.

Intermediaries legislation

Another term for IR35 legislation.

Intention of parties

The “intention of parties” is a term for the underlying intentions of a client and/or their contractor, that goes beyond what is written in their contract of services or contract for services.


The items or stock owned by a business.


A person who invests money or capital into a business with an expectation of future financial return.


A document that a business issues to clients so they pay for the goods or services they’ve been provided. If you need help putting a great-looking invoice together, check out our free invoice software and invoice templates. Each invoice should have a unique identifier assigned by the seller – this is called an invoice number.


IR35 is a tax law introduced to combat tax avoidance by workers supplying their services to clients via an ‘intermediary’ (such as a limited company) who would otherwise be an employee. Our what is IR35 article explains more.


A company’s legal debts e.g. loans, mortgages or accounts payable.

Limited company

An organisation set up to run a business, that is responsible for everything it does. Finances are separate from personal finances, and directors are responsible for running the company. Find out more about the Crunch accountancy service for limited companies here.


A method of promoting a business to the consumer. Can include advertising, competitions, paid search, social promotion and more.


Mutuality of obligation (MOO) is the obligation of an employer to provide work for an employee to do.

National Insurance number

Your National Insurance (NI) number is your personal identifier for the social security system. This identifier ensures that your National Insurance contributions and tax are properly recorded.

Net worth

The value of a company, based on its total assets, minus its total liabilities.

New Enterprise Allowance

A scheme designed to help the long-term unemployed back to work by helping them set up their own business. If you’ve got a feasible business plan, you might be entitled to a weekly allowance worth up to £1,274 over 26 weeks. Read more about the New Enterprise Allowance.


A form for tracking deductions made by PAYE. It’s sometimes known as a Deductions Working Sheet.


A form filled in by an employer to report on benefits in kind. These are items or services which you (or your employees) receive from your company in addition to your salary, such as private healthcare, interest-free loans (to pay for train season tickets, for example) and company cars. The annual P11D form allows you to report these items to HMRC on your annual Self Assessment return.


A form required for each individual employee for whom a P11 (or equivalent record) has been maintained.


A now-defunct form that combined all of your employees’ end-of-year payroll totals. This was abolished on 1st January 2019.

P45 / P46

When you stop working for an employer, they give you a P45 – this is a record of how much they paid you in that tax year, and how much tax was deducted. You need to provide a P46 if you can’t provide your new employer with your last P45 form, you are starting your first ever job, or you are starting a second job without leaving your current employment.


A P60 is a summary of your pay and all deductions in a specific tax year (that’s 6th April right through to 5th April the following year). Our related article will tell you everything you need to know about the P60 form.


When you enter into a business partnership, you and your partner (or partners) personally share responsibility for your business, including its assets and any losses.

Partnership Statement

A statement of: the total income, losses, credits and charges of the partnership for each period of account ending in that return period, and each partner’s share of that income, loss, credit or charge.


Stands for Pay As You Earn. It’s a compulsory method of tax collection, where the employer must deduct tax from most wages and salary payments to staff. PAYE is deducted from the salary of anyone earning more than the National Insurance Threshold.

PAYE Annual Return

Also known as an Employer Annual Return. Comprises of a P35 and P14 form and combines all of your employees’ end-of-year payroll totals. Most employers are required to file their PAYE Annual Return with HMRC online by the 19th May.

Payment on Account to HMRC

A system for those who pay most of their tax through Self Assessment. If more than 80% of your income gets taxed through PAYE, then this won’t apply to you. Otherwise, if your Self Assessment bill is more than £1,000, you’ll need to make a payment on account. We’ve written an article to explain payment on account further.

Payment Terms

Terms that specify the number of days allowed to your client to pay off the amount due.

Payroll run

Every time you pay yourself or company employees a salary.

Personal Service Company (PSC)

This label Personal Service Company applies to your company if more than half of your income is derived from services that are performed by its shareholders and provided under contracts between your company and its clients. However, this does not necessarily mean you fall within IR35. Not to be confused with the identical acronym for Persons of Significant Control below!

Persons of Significant Control (PSC)

Companies House requires every company to identify and record people who have significant control over them. This information is recorded on a persons of significant control (PSC) register with Companies House. Read more on the Persons of Significant Control register. Not to be confused with the identical acronym for Personal Service Company above!

Professional Indemnity Insurance

Protection for your business against a customer suing you for a financial loss that they believe was caused through your negligent advice and / or services. Read more about Professional Indemnity Insurance.

Profit and loss account (also known as the Income Statement)

An account showing a businesses net profit and loss over a given time frame. In your year end accounts, this is described as the Income Statement.

Provision of equipment

A test to determine who has supplied the equipment a contractor uses. If these are provided by the end client, the contractor is likely to be outside of IR35.

Rechargeable Expense

An expense that you incur for work done for a client (e.g. travel costs). You can pass on the expense cost by charging it to the client on an invoice. Get all the information you need about business expenses.

Retained Profit

The amount of net income kept in your limited company which hasn’t been withdrawn from the company as dividends.

Real Time Information (RTI)

Since 6th April 2013 employers have been required to report PAYE information to HMRC in real time. This means that employers have to send details to HMRC electronically every time they pay an employee as part of their routine payroll process.


Periodic payment to an employee from their employer.

Sales forecast

Prediction of future sales.

Self Assessment

It’s a requirement of HMRC that each director of a limited company complete a Self Assessment tax return detailing their personal finances. The return is due by 31st January each year. If you want to learn more, download our beginners guide to Self Assessment.

Service Address

An alternative to a residential address for the purpose of receiving business post. When registering a company, the director must state both their service address and their usual residential address (though they may well be the same address).


A person who owns shares in a company or business, whose rights are often governed by a Shareholders’ Agreement.


A portion of the company’s ownership divided amongst shareholders, giving the owner a proportion of the company.

Sole trader

A person who is exclusively the owner of a business and solely responsible for all profits and losses of that business. We’ve got a whole article about what a sole trader is. Or you can Find out more about the Crunch accountancy service for sole traders here.


A new business.

Statutory Sick Pay

If you have employees, they may be eligible for £89.35 a week in sick pay for up to 28 weeks. You can offer more if you have a company sick pay scheme – but you can’t offer less.


Self-employed contractor should be able to send a substitute contractor in their place if they are recognised as outside IR35.

Supervision, direction or control

A test to determine whether a contractor is inside or outside IR35. If a contractor is seen to be under the supervision of, taking directions from, or under the control of an end client, they are seen as inside IR35.

Supplier Reference

A handy way to remember your supplier or any important details about them.

Tangible Assets

Things the business owns that you can touch, such as property, equipment and cars.

Target market

A group of consumers to which a product is aimed.

Taxable Supplies

All goods and services you sell or otherwise supply which are liable to VAT at the standard, reduced or zero rate. Only for VAT registered businesses.

Taxable Turnover

The total value, excluding VAT, of the taxable supplies you make in the UK. This excludes items like buildings, equipment, vehicles or exempt supplies. However it includes; zero rated supplies and services you received from businesses in other countries that you had to ‘reverse charge’.

Tax Point

The time when a VAT liability arises. For goods, this is usually when you send the goods to a customer or when they take them away. For services, this is usually when the service is performed.

Trial Balance

A list of ledger balances, in debits and credits, within your yearly general ledger.

Umbrella company

A company that acts as an employer to agency contractors, usually taking care of all their tax responsibilities and processes their payments.

Unallocated Payments

If you’ve added a payment without linking it to an expense or an invoice, this is classed as an unallocated payment. You should allocate all your payments to ensure your accounting records are accurate.

UTR Number

This is your Unique Tax Reference number and can be found on the top left hand corner of your previous tax return or any Self Assessment correspondence from HMRC. If you don’t have a UTR number you can apply online at and then click individual.

Written Down Value

Written-down value is the value of an asset after accounting for depreciation or amortisation.

Working practises

Another term for the day-to-day relationship between a contractor and their client. This test will help determine whether a contract is inside IR35.

We're helping you to simplify the world of owning your own business with lots more helpful resources, including our guide to the government gateway ID, as well as some pointers on exactly what your UTR code is.

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Tom West
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October 8, 2020

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