glossary chapter 23

8/10/2019 Glossary Chapter 23

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Chapter 1Entities and Financial ReportingStatements

Glossary

Annual report

A document which contains the financial statements (with related notes) along with

reports from management explaining what they are doing and what they plan to do.

The supporting reports provided by management typically include the operating and

financial review, the directors report, the chairmans statement and the corporate

social responsibility report. They also provide information on how they govern

themselves in a corporate governance report and remuneration report.

Appropriation account

An account which is used to apportion the profit or loss for the period between the

partners in a business.

Available-for-sale assets

Investments that are denominated in money, or in paper (such as shares and

bonds), which the entity holds for financial gain and which will be sold by the entity in

the future.

Balance sheet

The UK equivalent of the statement of financial position. It contains details of an

entitys assets, liabilities and capital.

Comparatives

Term used to describe prior year figures that are included in the financial statements

so that current year results can be easily compared to the previous years figures.

Comprehensive income statement

Statement detailing the total performance of an entity in a specified period. The

performance includes realised income and expenditure and unrealised income

(holding gains).


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Corporation tax

Tax on a companys income.

Cost of services

Expenses that are directly related to the service that is being sold by the business.

For example, it would include the wages paid to trainee accountants and

accountants in an accountancy firm, but not the wages of administrative staff or

cleaners as their cost is not directly related to the service.

Current assets

Assets that the entity expects to turn to cash within one year (and cash itself).

Current liabilities

Liabilities that an entity expects to pay within one year.

Equity

The owners investment in the entity.

Equity holder

Another name for owner/proprietor.

Expenses

Yearly running costs. They are otherwise known as revenue costs.

Financial statements

A collective term to describe the comprehensive income statement, the statement of

financial position, the cash flow statement and the related notes.

Fixed assets

Non-current assets under UK financial reporting standards are called fixed assets.

They are assets that the entity expects to use for periods that extend beyond one

year.

Intangible assets

Cannot be seen or touched, but have value. They help the entity to generate

income. Examples include intellectual capital, knowledge and reputation.


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Inventory

Goods that have been purchased for resale, but are not yet sold. The UK financial

reporting standards refer to inventory as stock.

Investments in associates

Investments in paper shares, however, the intention is to retain this investment as

part of the entitys normal activities.

Liabilities

Obligations that the entity has to meet in the future

Limited liability

Owners liability for the debts of the entity is restricted to their investment in the

company (represented by monies paid for shares held) if it fails.

Listed entities

Entities that are listed as members of a stock exchange which offers its members a

platform to buy and sell their shares.

Long-term liabilities

Non-current liabilities under UK financial reporting standards are called long-termliabilities. These are liabilities that the entity expects to pay in periods that extend

beyond one year.

Minority interests

People/entities who own a small proportion of the shares in a plc are called minority

interests. They are otherwise known as non-controlling interests.

Non-control ling interests

People/entities who own a small proportion of the shares in a plc are called non-

controlling interests. They are otherwise known as minority interests.

Non-current assets

Assets that the entity expects to use for periods that extend beyond one year.

Non-current l iabilities

Liabilities that the entity expects to pay in periods that extend beyond one year.


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Notes to the financial statements

Detailed information to support the summarised information that is provided in the

comprehensive income statement, the statement of financial position and the

statement of cash flows.

Other comprehensive income

Income that is not realised during the period such as holding gains on the valuation

of non-current assets over the period being reported on.

Other income

Income from activities that are not the entitys core business. For example, receiving

interest, or rent.

Partnership

Describes a business that is owned and run by two or more individuals (partners).

Partnerships can be incorporated (as a limited company) or unincorporated (not

established as a separate legal entity).

Private limited companies

Incorporate entities that are privately owned, usually by a family or a small group of

investors. Their shares are not available for sale on a recognised share exchange.

Profit and loss account

The UK equivalent of the part of the statement of comprehensive income which

deals with revenue income (sales) and revenue expenditure (top half).

Profit or loss for the period

The total income made by the entity in the period less the total expenses incurred by

the entity in the period.

Property, plant and equipment

International term, the UK equivalent of which is tangible fixed assets. It comprises

land and buildings, plant and machinery, and fixtures, fittings, tools and equipment

Public limited companies (plcs)

Business that are owned partly or entirely by the public. They are listed as members

of a stock exchange and shares in their ownership are traded on the exchange

between owners and potential owners.


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Revenue

Income earned in the period from normal trading activities

Sole trader

Name for a business which is owned and run privately by an Individual who gets all

the profits, or suffers all the losses.

Statement of cash flows

Shows the source and use of cash in the period

Statement of changes in equity

Provides information on the movements within the equity accounts in the period.

Statement of financial position

Provides information on the financial position of an entity. It typically contains details

of the entitys assets, liabilities and equity capital.

Stewardship accounting

Term to describe a form of accounting which focuses on keeping a count of items. It

was the earliest form of accounting and typically involved keeping a record of theassets and liabilities of an entity.

Stewardship is the accountability of an enterprises management for the resources

entrusted to them.

Tangible assets

Assets that can be seen and touched (they are tangible in nature), for example a car,

a house, or a desk.

Tangible fixed assets

UK terminology for property, plant and equipment. It includes land and buildings,

plant and machinery and fixtures, fittings, tools and equipment.

Total comprehensive income

The total of the net income from revenue generating activities plus net revenue from

other activities, such as holding gains (increases in the values of assets held)

Trade creditors


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Trade payables under UK financial reporting standards are called trade creditors.

They are amounts owed to a supplier who provided goods on credit.

Trade debtors

Trade receivables under UK financial reporting standards are called trade debtors.

Trade receivables are amounts owed from a customer for credit sales (the goods

were given in advance of the entity receiving money for the goods).

Trade payable

Amounts owed to a supplier who provided goods on credit

Trade receivable

Amounts owed from a customer for credit sales (the goods were given in advance of

the entity receiving money for the goods).

Unincorporated entities

Not established/registered as separate legal entities in law.

glossary chapter 23

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