Accounting
Date Organisations prepare their annual accounts covering a period of twelve months. The last day of the period is called the accounting date.

Administration order
If a court appoints someone to look after a company’s affairs the court issues an administration order. This order gives the person appointed power to run the company.

Administrator
This is somebody who:

• has been appointed to manage the affairs of a bankrupt business; or
• has been appointed to manage the estate of someone who has died without leaving a will.

Alternate Director
If a Director appoints someone to take his or her place, the substitute is called an alternate director.

Annual Accounts
These are a summary of all organisation’s financial transactions during the year covered by their accounts, and a “snap shot” of the assets and liabilities at the end of the year.

Annual General Meeting (AGM)
This is the yearly meeting of the members of an organisation which must be held to meet legal conditions. The annual accounts are presented for approval at this meeting.

Articles
A company’s articles set out its rules. The articles form part of the Memorandum and Articles of Association.

Assets
These are things which are owned such as buildings, vehicles, stock and money in the bank.

Authorised share capital
This is the highest amount of share capital that a company can issue. The amount is set out in the company’s Memorandum of Association.

Balance Sheet
A balance sheet is a summary of an organisation’s financial position. It lists the values, on a particular date, of all the organisation’s assets and liabilities. The assets and liabilities are grouped in categories, to paint a picture of the organisation’s strengths and weaknesses.

Bankruptcy
If someone cannot pay their debts when they are due to be paid, a court may issue a bankruptcy order against them. This order takes ownership of the debtor’s property away from the debtor and allows much of the property to be sold. The money raised is divided between the creditors following strict rules.

Bill of Lading
This is a document recording the goods a ship carries and the terms the goods are carried under.

Books of account
These are books which a business must keep to record its financial transactions accurately.

Capital Allowances
You can sometimes claim capital allowances when you buy long-term assets, such as machines to use in your business. You claim part of the cost each year against your profits, before your tax is worked out.

Capital Gain
You make a capital gain if you sell or dispose of a long term asset (such as a building) for more than it costs you.

Contract
A contract is an agreement between two or more people (or groups) to do (or not to do) something. The agreement can be enforced by law.

Corporate Body
This is a group of people acting together. The group has a separate legal identity to the individual members’ identity. A company is an example of a corporate body.

Corporation Tax
This is a tax companies pay on their profits.

Credit
A credit is:

• money received;
• income from selling goods or services; or
• an entry on the right hand side in a double-entry book keeping system

Creditor
A person to whom money who is owed

Current Assets
These are short-term assets which are constantly changing in value, such as stocks, debtors and bank balances.

Current Liabilities
These are short-term liabilities which are due to be paid in less than a year such as bank overdrafts, money owed to suppliers and employees PAYE.

Data Protection Act 1984
This Act sets out the rules which an organisation has to follow when they store personal information about people.

Debtor
A person who owes money.

Depreciation
Depreciation is a drop in value of an asset due to wear and tear, age and obsolescence (going out of date) as recorded in an organisations’ financial records.

Directors Report
Every year company directors have to prepare a report for the company’s members to explain what the company has been doing and their plans for the future.

Distribution
If a company pays money (or other assets to its shareholders, it is making a distribution). When a company pays a dividend it is making a distribution.

Dividend
If a company has profits to share out it can pay a dividend. The shareholders get so much money for each share they own.

Execute
This means to carry out a contract.

Executed
If a document is made valid (in the eyes of the law) such as by being signed or sealed, it is executed.

Final Dividend
Once a company has drawn up its annual accounts the directors can work out and declare, or recommend to the shareholders, the amount of the final dividend.

Financial Year
This is the year covered by a set of annual financial statements.

Fixed Asset
A fixed asset is one which is intended to be used for several years. Examples are buildings, machinery and vehicles.

Floating Charge
A floating charge provides security for money lent to a company. The charge is over the company’s liquid assets (such as stocks and debtors). The charge is only triggered by an event such as liquidation.

Force Majeure
This is an event which cannot be controlled and which stops duties under an agreement being carried out.

Guarantee
A guarantee is sometimes needed before a bank will lend money to a customer. Another person (the guarantor) pledges to the bank, in writing, that if the customer does not repay the debt then the guarantor will.

Holding company
This is a company which controls another company, usually by owning more than half of its shares.

Indemnity
If someone promises to compensate someone else for loss or damage it is called an indemnity.

Independent Financial Advisor (IFA)
This is a qualified person or firm that can give people independent advice on life insurance and pensions and is not tied to a particular company.

Indexation
This means making adjustments to allow for the effects of inflation.

Inflation
This is a name for general price increases.

Insolvent
If debts cannot be paid when they are due for payment, the person or organisation owing the money is insolvent.

Interim Dividend
The director of a company can review the company’s performance part way through the financial year and defer a dividend. This is called an interim dividend.

Investment Trust
This is a company which is quoted on the stock exchange and which invests in other companies.

Issued Share Capital
This is share capital which has been allocated to share holders who have subscribed for (asked for) shares.

Limited Company
This type of company limits how much its members will have to pay if the company is wound up. The members of most limited company’s will only have to pay money unpaid on their shares. If a company limited by guarantee is wound up, the money its members have to pay is limited to the amount shown in the memorandum.

Liquidation
This is the process of winding up a company by paying its creditors and distributing any monies left among the members.

Market Capitalisation
If you multiply the number of ordinary shares a company has issued by their market price, you get the market capitalisation of the company.

Memorandum and Articles of Association
The memorandum gives details of a Articles of Association company’s name, objects (purposes) and share capital. It also sets out the limits of the shareholders liability if the company has to be wound up. The articles set out the members’ rights and the directors’ powers.

Net Book Value
This is what an asset costs, as recorded in the book of accounts, less any depreciation taken off the asset for age and wear.

Operating Profit (or Loss)
The profit (or loss) from a company’s principal (main) trading activity.

Option
Under this sort of contract, paying an amount of money gives the right to buy or sell goods at a fixed price by a particular future date.

Ordinary Resolution
If a resolution can be passed at a meeting by more than half of those voting in favour, it is an ordinary resolution.

Paid-Up Share Capital
This is the money paid on shares allotted to the members.

Private Limited Company
A private limited company cannot sell its shares to the public and is not listed on the stock exchange.

Profit and loss account
A profit and loss account shows the money earned by a business from selling goods and services, less the money spent on goods, services and overheads.

Promissory Note
This is a written promise to pay an amount of money to someone at a given time or on demand.

Prospectus
If a public company wants to get people to invest in it, it prepares a prospectus giving details of its past performance and its plans for the future.

Public Limited Company (Plc)
A public limited company can offer its shares to the public and is often listed on the stock exchange.

Quorum
A quorum is the lowest number of qualifying people needed for a meeting to be valid.

Related party
This is someone, or an organisation, which controls or significantly influences another organisation.

Rights Issue
This is an issue of extra shares by a company. Existing shareholders can buy extra new shares in proportion to the shares they already hold. The shares are usually on sale at a price lower than the stock market price to encourage shareholders to buy. The shareholders can sell the rights if they do not wish to use them.

Share Capital
This is the money invested directly in a company by its members (shareholders).

Share Certificate
This document certifies who owns shares in the company. It gives the type and number of shares owned by the shareholder and lists the serial numbers of the shares.

Share Premium Account
If shares are issued for more than their face value, the extra amount over the face value is called a share premium. The total of all the share premiums is quoted in a share premium account in the company’s books.

Stock Broker
A stock broker buys and sells stocks and shares for clients.

Subsidiary
A subsidiary is a company controlled by another company. The control is normally a result of having more than 50% of the voting rights.

Surety (Guarantor)
A surety is someone who takes responsibility for someone else’s debts or promises and guarantees that they will be paid or undertaken.

Tax Week
The tax year is split up into 52 tax weeks. The first tax week starts on 6th April and finishes on 12th April and the other 51 weeks follow in order.

Term
A term is any of the clauses which form part of the contract.

Turnover
The turnover of a business is the total value of its sales over a particular period.

Unincorporated body
This is a group of people acting together but who do not form a separate legal body

Winding up
Winding up a company is done by paying the company’s creditors, and then distributing any money left among the members.

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