What are Invoice numbers?

Jordan Macey

September 3, 2021

What are Invoice numbers? guide
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Small Business Accounting

An invoice number is a unique number that is assigned to each invoice. This number is one of the most important elements of every invoice. Its role is to identify transactions, so it needs to be unique. Invoice number can contain only numbers or letters and numbers. It may contain date of issue, name of project or task.

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What are benefits in kind? Guide

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 are Cost of Sales? Guide

What are Cost of Sales?

The cost of sales is the accumulated total of all costs used to create a product or service, which has been sold. The cost of sales is a key part of the performance metrics of a company, since it measures the ability of an entity to design, source, and manufacture goods at a reasonable cost.

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31 Accounting Terms & Concepts You Need to Know Guide

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 is Statutory Paternity Pay? Guide

What is Statutory Paternity Pay?

Statutory Paternity Pay is the amount of money that must by law be paid to the father of a new baby while he is away from his job.

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What is Retained Profit? Guide

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 Aged Debtors? Guide

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 Employment Allowance? Guide

What is Employment Allowance?

Employment Allowance enables eligible employers to reduce their National Insurance bill by up to £4,000 each year.

HMRC's resource provides further details on checking if you're eligible, how and when to make a claim and what to do after you've made a claim.

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What are Credit Notes? Guide

What are Credit Notes?

A credit note is a document that a business issues to its customers. It is used whenever an invoice needs to be changed and re-issued, such as when a customer changes or cancels an order, or is charged an incorrect amount.

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What are Current Liabilities? Guide

What are Current Liabilities?

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

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What are BACS and CHAPS payments? Guide

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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When do you need accounting software? Guide

When do you need accounting software?

In the early stages of starting up your company, managing your accounts via spreadsheets may suffice.

But as your business grows, you may find yourself spending an inordinate amount of time on getting your business finances and accounts sorted out.

Perhaps you're not entirely sure if you should stick with our current practices-or seek out a new way to handle your accounting.

We'll explore this in our article below, where we dive into five signs that indicate it's time for small business owners to make the switch:

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Moving to the Cloud: Excel to Accounting Software Guide

Moving to the Cloud: Excel to Accounting Software

With the rollout of Making Tax Digital (MTD) in April 2019, it has become mandatory for all VAT-registered businesses to keep their financial records in digital format, and submit their VAT returns using MTD-compatible software.

While you can continue to use spreadsheets for your business records, you'll need bridging software to make them MTD-compatible. Here's a quick explanation of the term: bridging software is a tool that takes data from your spreadsheet, and "translates" the information digital in the correct format to HMRC's system.

Sounds complex?

Perhaps it's time to look into online accounting solutions that can manage your VAT processes within a single system.

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What are Money Transfers? Guide

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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5 Key Benefits of Accounting Software when Self Employed Guide

5 Key Benefits of Accounting Software when Self Employed

As a self-employed person or small business owner, sing a spreadsheet to manage your accounting may once have sufficed in the initial stages of running your business.

But as your company grows, the following occurs: your financial data becomes increasingly complex, you're adding on new accounts and you may be bringing on additional staff. You now require a scalable solution-and you're wondering if it's time to transition from spreadsheets to accounting software.

If you're still on the fence, and unclear about the value that an accounting software brings to your business, here are five key benefits you'll reap if you make the switch:

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What are Payment Terms? Guide

What are Payment Terms?

Payment terms indicate when payments should be made and how. These terms are usually included in the invoices generated by companies and sent to customers.

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What are Authorised Agents? Guide

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 are Fixed Assets? Guide

What are Fixed Assets?

Fixed assets are property or equipment that a company owns, and uses in its day-to-day operations for income generating activities. These include machinery, equipment, buildings and land.

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What is the Accounting Reference Date? Guide

What is the Accounting Reference Date?

The Accounting Reference Date (ARD) is the date on which a company's financial year ends, and when it has to submit its annual accounts.

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What banks does Xero integrate with? Guide

What banks does Xero integrate with?

Xero connects with most banks in the UK, including Barclays, HSBC, NatWest, RBS and more. You may view the full list of banks here.

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What banks does FreeAgent integrate with? Guide

What banks does FreeAgent integrate with?

Presently, FreeAgent supports over 40 feeds from banks worldwide. You may refer to their resource to see which banks are listed, or search for your bank using the search tool in the Banking area of FreeAgent.

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