The MHA Glossary

Accounting and Financial Terms

• Accounts Payable: A current liability that represents the amount owed to suppliers for goods or services received on credit.
• Accounts Receivable: A current asset that represents the amount of money owed to the company by its customers for goods or services provided on credit.
• Accruals: Recording revenue and expenses when they are incurred or earned, regardless of when the cash is received or paid.
• Annual Report: A comprehensive report issued by a company to its shareholders, typically containing financial statements, management discussion and analysis, and other relevant information.
• Audit Report: A formal document issued by an auditor that summarises the findings of an audit, including any issues identified, recommendations for improvement, and the auditor's opinion on the fairness of the financial statements.
• Audit Trail: A step-by-step record that traces the history of a financial transaction from its origin to its final outcome, providing evidence of its completeness and accuracy.
• Auditing: The examination of financial records and statements to ensure accuracy, completeness, and compliance with relevant laws and regulations.
• Balance Sheet: A financial statement that shows a company's financial position at a specific point in time, typically listing assets, liabilities, and equity.
• Bookkeeping: The process of recording financial transactions and maintaining financial records.
• Cash Flow Statement: A financial statement that shows the flow of cash into and out of a business over a specific period, typically categorised into operating, investing, and financing activities.
• Control Testing: The process of evaluating the effectiveness of internal controls designed to prevent or detect errors or fraud in financial reporting.
• Cost of Goods Sold (COGS): The direct costs attributable to the production of goods sold by a company, including materials, labour, and overhead.
• DayShape: A software platform used to plan, manage and assign jobs to the team.
• Depreciation: The allocation of the cost of a tangible asset over its useful life.
• Equity: Ownership interest in a business, also known as capital or shareholders' equity.
• Financial Statements: Formal records of the financial activities and position of a business, including the income statement, balance sheet, and cash flow statement.
• Fiscal Year: A period of 12 consecutive months used for financial reporting and budgeting purposes, which may or may not coincide with the calendar year.
• Fixed Asset: A long-term tangible asset used in the production or distribution of goods and services, such as property, plant, and equipment.
• GAAP (Generally Accepted Accounting Principles): The standard framework of guidelines for financial accounting used in the preparation of financial statements.
• General Ledger: A complete record of a company's financial transactions, organised by account.
• IFRS (International Financial Reporting Standards): A set of accounting standards developed by the International Accounting Standards Board (IASB) to provide a common global language for business affairs.
• Income Statement (P&L): A financial statement that shows a company's revenues, expenses, and net income over a specific period, often referred to as the profit and loss statement.
• Intangible Asset: A non-physical asset with economic value, such as patents, trademarks, copyrights, and goodwill.
• Journal Entry: The recording of a financial transaction in the accounting system, typically consisting of a date, accounts debited and credited, and a brief description of the transaction.
• Ledger: A book or electronic record that contains all accounts used by a company, including assets, liabilities, equity, revenue, and expenses.
• Liabilities: Financial obligations of a company, including short-term debt, long-term debt, and accounts payable.
• Organisational Structure: The arrangement of roles, responsibilities, and authority within a business or organisation.
• Return on Investment (ROI): A measure of a company's profitability by dividing net income by shareholders' equity, taking into account any initial investments in the company.
• Revenue: The income generated by a company from its normal business activities.
• Sampling: The practice of selecting a subset of data or transactions for examination in order to draw conclusions about the entire population, commonly used in audit procedures to test controls and transactions.
• Substantive Testing: Audit procedures performed to obtain audit evidence about the completeness, accuracy, and validity of the data produced by an entity's accounting system.
• Trial Balance: A list of all accounts in the general ledger and their balances at a specific point in time, used to ensure that debits equal credits.
• Operating Expenses: The costs a company incurs during its day-to-day business operations.
• Working Capital: A measure of a company's current assets minus its current liabilities, indicating its ability to meet short-term obligations.

Tax-Specific Terms

• Capital Gains Tax: A tax charged on the rise in value on the sale of an asset, such as a residential or commercial property, stocks, shares, etc.
• Corporate Tax: A tax charged on the taxable profits of Limited companies.
  Dividend: A distribution of profits from a Limited company to its shareholders, typically in the form of cash, repayment of their loan account, or additional shares.
• HM Revenue & Customs (HMRC): The UK government agency responsible for collecting taxes, customs duties, and other revenue-related functions.
• Income Tax: A tax charged on income sources received by individuals, including from the taxable profits of their unincorporated businesses, e.g., sole trades and partnership/LLP profit shares.
• Inheritance Tax: A tax charged on the assets less liabilities held within the estate of a deceased person before the assets are distributed to heirs or beneficiaries.
• IR35: Intermediaries Legislation - A set of tax rules in the UK designed to ensure income tax and national insurance is correctly paid on employment duties.
• P45: Employee Leaving Form - A form issued by employers to employees when they leave an employment, providing details of earnings and tax paid during the employment in the tax year of leaving.
• P60: Employee End of Year Certificate - A form issued by employers to employees at the end of the tax year, summarising earnings and tax deductions for the year.
• P800: Tax Calculation Summary - A form issued by HMRC to taxpayers showing calculations of tax owed or overpaid for a particular tax year.
• Self-Assessment: A system used by HMRC for individuals and businesses to report their income and pay any tax owed.
• Stamp Duty: A tax charged on the value of transactions involving certain legal documents, such as property and share transactions.
• Tax Avoidance: The legal practice of arranging one's financial affairs to minimise tax liabilities within the boundaries of the law.
• Tax Credit: An amount subtracted directly from the tax owed, providing a pound-for-pound reduction in tax liability.
• Tax Deduction: An expense that reduces the amount of taxable income, thereby lowering the amount of tax owed.
• Tax Evasion: The illegal practice of deliberately avoiding paying taxes owed by underreporting income, inflating deductions, or other fraudulent means.
• Tax Exemption: A provision in the tax law that allows certain types of income or transactions to be excluded from taxation.
• Tax Planning: The process of arranging financial affairs in a way that minimises tax liability while remaining compliant with tax laws and regulations.
• Tax Residence: The status of an individual or entity as a resident for tax purposes in a particular jurisdiction, often based on the duration of stay or other criteria.
• Tax Return: A form filed with HMRC that reports income, expenses, and other relevant financial information for tax purposes.
• Tax Treaty: An agreement between two or more countries to prevent double taxation of income and facilitate cooperation in tax matters.
• Tax Tribunal: An independent body that hears appeals and resolves disputes between taxpayers and tax authorities regarding tax assessments and decisions.
• Tax Year: The annual period for which taxes are calculated and paid. The UK tax year runs to 5 April. Many other countries have a tax year that runs the calendar year to 31 December.
• Value Added Tax (VAT): A consumption tax levied on the value added to goods and services at each stage of production or distribution.
• Withholding Tax: A tax deducted at the source of income, such as from wages or dividends, before the income is paid to the recipient.