Published: 12/11/2018 By Shaun ClarkAs accountants, it is our role to explain to you everything we have done when it comes to preparing your accounts, VAT returns, tax etc. However, there may still be some instances in which we use unfamiliar terminology to you.
Below we have listed a few of the common accountancy terms we use so that next time you hear these terms mentioned, you won’t be left scratching your head:
Accrued income: this relates to income which has been ‘earned’ but not yet received. For example, a building company might work on a project throughout March, but not raise an invoice for the work done until April. This is accrued income as the invoice raised in April relates to a prior period.
Deferred income: this is essentially an advance payment from a customer for goods or services which have not yet been delivered/undertaken. If we use the same example as above, this would be something such as a building company receiving a payment in March relating to work that was due to be started in April.
Prepayments: prepayments are payments made by you or your business in advance of the goods or services being received later on. A common example a prepayment is insurance, as you may pay a whole fee at the start of they year, which consequently covers you for the next 12 months.
Whilst there are other terms we use frequently such as debtors, creditors or accruals to name but a few, we will always clarify what we mean when we talk to you, and as expert accountants for SME businesses, we are more than happy to explain any unfamiliar jargon to you.
Feel free to give us a call and cut through the jargon on 0208 661 7878.