Final accounts - terms

Opening stock: This is the amount of stock available at the beginning of the year. It is stock left over from last year. Carriage inwards: The cost of having stock delivered to the company. It is a cost of sales in the trading account.

Import duty: Tax paid for goods bought abroad outside the EU. It is a cost of sales in the trading account. Interest receivable: Interest received for having savings in the bank which is subject to DIRT. It is a gain in the profit and loss account.

Rent receivable: Rent received for renting out some of the company property. It is a gain. Wages: Money paid to employees for work performed. It is an expense in the profit and loss account. Insurance: Cover for events that might happen. This is an expense.

Bad debt: Money lost when creditors do not pay their bills owed to the company and may never pay the money back. This is an expense.

Carriage outwards: Cost of having stock delivered out of the company. This is an expense. Depreciation: Reduction in the value of a fixed asset. This is due to many reasons such as amount of use, wear and tear, millage, age or economic environment. This is an expense.

Bank overdraft: With permission from the bank a person can withdraw more money from their current account than they have in their account up to a certain limit. This is a current liability.

Dividends: Percentage of the net profit paid to shareholders.

Retained earnings: Profits held back by the company for future investments. They are also known as reserves and can be used by the company to expand the business.

Fixed assets: Items that the business owns on a long-term basis such as land, buildings and machinery.

Debtors: A person who owes the business money – they bought goods on credit from the business. Creditors: A person/business who the business owes money to – the business bought goods on credit from this person/business.

Current assets: Items that the business owns on a shorter term (within one year) basis such as stock, cash and debtors.

Current liabilities: Items that the business does not own and must pay for in the future (within one year) such as creditors and bank overdraft.

Working capital: Current assets – Current liabilities.

Authorised share capital: Amount of shares that the company are legally allowed to sell. This amount is decided by the shareholders at the first AGM.

Issued share capital: Amount of shares the company has already sold.