What is a Profit & Loss Account?

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.

1. Furlough scheme extended to September 2021

The government has committed to continue paying 80% of employees' wages when they are unable to work, with employers not having to make any contributions until July 2021.

2. Support for the self-employed extended to September 2021

As part of the covid support package from the government, the the Chancellor confirmed that he will extend the self employed income support scheme with those submitting a self assessment tax return before midnight 2nd March being eligible.

3. Universal Credit uplift to stay for 6 months

The £20 weekly uplift in Universal Credit has been extended for a further 6 months, with Working Tax Credit claimants being eligible for a £500 one-off payment.

Taxable turnover is the turnover on which the seller is liable to pay tax.

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.

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.

Approaching a company's first year-end can feel incredibly stressful, as there will be a lot of paperwork you need to file at this time.

In this article we provide you with a simple list of what you will need to do, along with a few tips to make the whole process easier for you. We finish with the penalties and deadlines for late filing.

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.

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.

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.

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.

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.

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.

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

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.

Written-down value, otherwise known as the book value or net book value is the value of an asset after accounting for depreciation or amortisation. It represents the present worth of an asset from an accounting perspective.

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

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.

Depreciation is 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.

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.

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.