Sometimes it seems like accountants have a language of their own. Please find a few of the terms accountants use and the meaning in plain English.
- Turnover: Turnover means how much money a business makes from selling things or providing services. It’s another word for sales.
- Overheads: Overheads are regular expenses that a business has to pay to keep running, like rent, utilities, and employee salaries.
- Depreciation: Depreciation is when something you own, like a building or a machine, loses value over time. It’s like how a car becomes less valuable as it gets older.
- Gross profit: Gross profit is the money a business makes from sales after subtracting the cost of making or delivering the products or services.
- Net profit: Net profit is the money a business has left after paying all the expenses, like overheads, taxes, and interest. It’s the actual profit the business earns.
- Balance sheet: A balance sheet is like a snapshot of a business’s money situation at a specific time. It shows what the business owns, what it owes, and how much money the owners have put in.
- Cash flow: Cash flow is how money moves in and out of a business. It includes money from sales, expenses, investments, loans, and other financial activities. It’s important to track cash flow to make sure the business has enough money to pay its bills.
- Assets: Assets are what your business owns such as cash in the bank, equipment and money owed to your business.
- Liabilities: Liabilities are what your business owes such as taxes, money owed to suppliers, loans and overdrafts.
If you have any further words you don’t understand, please let me know and I’ll add them to this list.