What are Current Liabilities?

Jordan Macey

April 21, 2021

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Small Business Accounting

Current liabilities, otherwise known as short-term liabilities are due within a year.

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What are Authorised Agents?

Through the agent authorisation process, a client is able to authorise an agent to deal with HMRC on their behalf. Further information is available on the HMRC website.

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What is Retained Profit?

Retained profits, or retained earnings are profits that a firm has earned to date (after deducting dividends or other distributions paid out to investors) and are retained in the company's accounts. In a balance sheet, retained profits are included under the owner's equity section.

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What are BACS and CHAPS payments?

CHAPS-an abbreviation for Clearing House Automated Payment System-is a same-day bank-to-bank payment system. It is typically used for large, one-time payments, as the transfers are relatively expensive to process. There are no upper or lower limits to the amount that can be transferred.


BACS, or Bankers' Automated Clearing Services enables payments to be made electronically from one bank to another. The transfer method handles all debit and credit card transactions, has an upper limit of £250,000 per transfer and is mainly used for low-value transactions. BACS payments take three working days to clear.


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What are Aged Debtors?

An aged debtors report shows a list of customers (debtors) who owe your business money, as well as the amount owed at any given time.

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What is an Annual Return?

An annual return (AR01) is a document that all businesses are required to submit to Companies House each year. It details general information about a company, such as its ownership, capital position and management. The annual return has been replaced by the confirmation statement (CS01) since 30 June 2016.

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What is a Profit & Loss Account?

The profit and loss account (P&L) is a financial report that shows the revenue, expenses and profit or loss of your company over a specific accounting period.

This period can be a month, a quarter or a year. A P&L is also commonly referred to by other terms, such as the income statement, statement of operations, financial results statement and earnings statement.

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What is Statutory Adoption Pay?

It is the amount of money that must by law, be paid to an adoptive parent when he or she takes time off to adopt a child, or have a child through a surrogacy arrangement.

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What is Amortisation?

In business accounting, amortisation is a method of calculating the value of a business asset over time. It is the process of spreading out the cost of an asset over its useful life.

In relation to loans, amortisation refers to the spreading out of loans into a series of fixed monthly installments.

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What are Supplier References?

A supplier reference (or trade reference) refers to a report detailing the payment history between a business customer and its supplier or vendor. It enables a supplier to check your creditworthiness and find out if you're a reliable customer before they offer you credit.

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What are Creditors?

A creditor is an individual, company or entity that has provided goods or services to a business and is owed money. In the balance sheet, a creditor may be listed under the current liabilities or long-term liabilities section.

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What are Bank Deposits and depositing cheques?

A bank deposit involves placing money into an account with a banking institution. Depositing a cheque is one way to make a deposit. You can also deposit cash or make a funds transfer.

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What are Debtors?

The term ‘debtor' refers to an individual or company that owes money, or is in debt to an individual or organisation. An example would be a customer that has purchased a product or service from your business. In the balance sheet, debtors are listed under the current assets section.

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What are Assets?

An asset is any resource that is owned by a company. There are two main types of assets: current assets and non-current assets. Current assets are expected to be consumed within a year, while non-current assets are expected to be held for longer than a year.

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What are Taxable Supplies?

A taxable supply is any supply made in the UK which is not exempt from VAT.

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What are Interim Accounts?

Interim accounts are accounts prepared during the tax year to show the current financial position of a company.

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What are Money Transfers?

Retained profits, or retained earnings are profits that a firm has earned to date (after deducting dividends or other distributions paid out to investors) and are retained in the company's accounts. In a balance sheet, retained profits are included under the owner's equity section.

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What are Tangible Assets?

Tangible assets are physical assets or property owned by a company, such as equipment, buildings, and inventory.

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31 Accounting Terms & Concepts You Need to Know

Whether you're self-employed or running a small business, you need to stay on top of your business finances.

While you can delegate your company's financial affairs to your accountant, it's still important to have a good grasp of the essentials-such as basic accounting terms and concepts. With this knowledge, you'll be better able to communicate with financial professionals, team members and potential investors.

To help you get started, we've written up an introductory guide to accounting terms you need to know:

Accounts payable (AP)

This refers to money owed to the business by its creditors (suppliers, vendors and other service providers). These are recorded as a liability on the balance sheet.

Accounts receivable (AR)-

This refers to money owed to the business by its debtors (clients and customers). The amounts are recorded as an asset on the balance sheet.

Accruals

Accruals are amounts that are unaccounted for at the end of the accounting period. These can be expenses that have been incurred or revenue that has been earned, but aren't yet recorded in the accounts.

Assets

Any resource that is owned by a company. There are two main types of assets: current assets and non-current assets. Current assets are expected to be consumed within a year, while non-current assets are expected to be held for longer than a year.

Balance sheet-

The balance sheet shows how much a business owns (assets), owes (liabilities) and the amount that is left over for its owners (owner's equity) at a point in time.

Cash flow

Cash flow refers to the total amount of money that is moving in and out of your business.

Chart of accounts

The chart of accounts is a listing of all the accounts used in the general ledger of the business.

Cost of goods sold (COGS)-

The total of all costs associated with producing your products or services.

Credit

An accounting entry that increases a liability or owner's equity account, or decreases an asset or expense account. The term may also be used to refer to an entry on the right side of a T-account.

Debit

An accounting entry that increases an asset or expense account, or decreases a liability or owner's equity account. The term may also be used to refer to an entry on the left side of a T-account.

Depreciation

The measurement of the decline in the worth of an asset.

Common methods of depreciation include: straight line, units of production, sum-of-years-digits and double-declining balance.

Dividends-

Dividends are a payment of profit that a limited company distributes to its shareholders.

It is the money remaining after all business expenses and liabilities, as well as outstanding taxes (including VAT and Corporation Tax) have been paid off.

Generally Accepted Accounting Principles (GAAP):

In the UK, the GAAP is a set of accounting standards published by the UK's Financial Reporting Council (FRC) for reporting financial information.

General ledger

A record of all the accounts that a business uses.

The accounts are classified into three categories: assets, liabilities and equity accounts.

Profit & loss (P&L)

The P&L is a financial statement that shows how much money your business has made or lost.

Liabilities

Debts and obligations of a company.

There are two main types of liabilities: current liabilities and non-current liabilities. Current liabilities (otherwise known as short-term liabilities) are due within a year, while non-current liabilities are due after a year.

Equity

Equity can have several meanings in accounting.

Firstly, it refers to the net amount of finances an owner has invested in the company.It can also refer to the residual value of assets less liabilities, as represented by the accounting equation ‘Equity = Assets - Liabilities'.

Expenses

Costs incurred by a company for revenue generation.

A few common types of expenses a business may incur are:

  • Fixed expenses: The total amount of the expense doesn't change over the short-term, despite changes in sales volume or other business activities. Examples include lease and rent payments.
  • Variable expenses: As its name suggests, the total amount of the expense varies in proportion to changes in sales, production or other business activities. Examples include salaries, utility expenses or costs of raw materials.
  • Operating expenses: Expenses incurred for activities that aren't directly related to the production of goods or services. Examples include administrative expenses, or legal and financial fees.

Net income

Otherwise known as net profit, net income refers to a business' financial position when the total revenue is more than the total expenses.

Present value (PV)

Present value is a calculation that measures the current value of a sum or stream of money to be received in the future, through adjusting for inflation and interest.

Return of investment (ROI)

A metric of profitability used to measure the gain or loss that an investment generates, relative to the sum of money invested.

Revenue

The amount of money a company receives from selling its goods or providing its services.

It refers to the amount earned before expenses are deducted.

Trial balance

A trial balance is a report that lists the balances of all general ledger accounts of a business at a specific point in time.

An expense should be recorded in the same period that the related revenue is earned.

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What are benefits in kind?

For self-employed persons or employers, it can be challenging trying to understand the rules surrounding benefits in kind. These can be complicated; some benefits are taxable while others aren't, and it gets tricky figuring out which rules apply to your situation.

To make things a little easier to understand, we've written up a quick guide below. After reading our guide, you'll understand what benefits in kind are, have a clearer idea of which ones are taxable (and which ones aren't), and get an overview of what you need to do when it comes to reporting and paying taxes on benefits in kind.

Do keep in mind that this isn't a definitive guide, as HMRC's decision to impose a tax varies by situation. If you need specific advice, doconsult our specialist accountants at Forma.

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What is a Balance Sheet?

A balance sheet is a financial statement that provides a snapshot of the financial condition of a company, showing how much it owns (assets), owes (liabilities) and the amount that is left over for its owners (owners' equity) at a specific point in time. It is typically completed at the end of a month or a financial year.

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