Understanding basic accounting terms: A guide

At BlueFox Accounting, we understand that accounting jargon can sometimes be confusing. To help you navigate the world of finance, we've put together a simple guide explaining some common accounting terms.

What is a Profit and Loss Statement?

A Profit and Loss Statement (P&L) is a financial report that summarises the revenues, costs, and expenses incurred during a specific period. It shows whether your business is making a profit or a loss. Think of it as a financial health check-up for your business.

What is a Balance Sheet?

A Balance Sheet provides a snapshot of your company's financial position at a specific point in time. It lists your assets, liabilities, and equity. The balance sheet follows the equation: Assets = Liabilities + Equity.

What is a Cashflow Statement?

A Cashflow Statement tracks the flow of cash in and out of your business over a period. It helps you understand how well your company manages its cash to fund operations, pay debts, and invest in future growth.

What are Fixed Assets?

Fixed Assets are long-term resources such as buildings, machinery, and equipment that a company uses in its operations. These assets are not expected to be converted into cash within a year.

What are Current Assets?

Current Assets are short-term resources that are expected to be converted into cash within a year. Examples include cash, inventory, and accounts receivable.

What are Current Liabilities?

Current Liabilities are obligations that a company needs to pay off within a year. These include accounts payable, short-term loans, and other debts.

What is Equity?

Equity represents the owner's interest in the company. It is calculated as Assets minus Liabilities. Equity can include retained earnings and any capital invested by the owners.

What is a CT600?

A CT600 is the form used by companies in the UK to file their Corporation Tax return with HM Revenue and Customs (HMRC). It details the company's income, expenses, and the amount of tax owed.

What is a Confirmation Statement?

A Confirmation Statement is a document that UK companies must file annually with Companies House. It confirms that the company information held by Companies House is up to date.

What are Persons of Significant Control (PSC)?

Persons of Significant Control (PSC) are individuals or entities that have significant influence or control over a company. This includes anyone who owns more than 25% of the company's shares or voting rights.

We hope this guide helps demystify some of the common accounting terms you might encounter. We believe in helping keep things as simple as possible when it comes to your finances. If you have any questions or need further clarification, feel free to reach out to us at BlueFox Accounting. We're here to help!