Let’s be honest: accounting can feel like a foreign language when you’re not in the thick of it. Whether you're just starting a business, managing your own books or working with an accountant, understanding a few basic accounting terms can go a long way.
This blog is your go-to accounting glossary — built for UK small business owners and freelancers. No fluff, no intimidating finance talk — just clear, simple definitions to help you feel more confident when reviewing your numbers or speaking with your accountant.
Here’s a breakdown of the most common accountancy terms you're likely to come across in the UK — especially if you're managing or growing a small business.
Definition: Total income or sales generated by a business before any expenses.
In Plain English: It’s how much money your business brings in — not your profit.
Definition: Revenue minus the cost of goods or services sold.
In Plain English: What’s left after you’ve paid to deliver your product/service, but before overheads like rent and salaries.
Definition: What remains after all expenses are deducted.
In Plain English: The real bottom line. This is what you actually earn.
Definition: Everything your business owns that has value (cash, stock, equipment, etc.)
In Plain English: Think of this as the stuff your business has that adds financial value.
Definition: What your business owes (loans, credit card debt, unpaid invoices).
In Plain English: These are your business's financial obligations.
Definition: A snapshot of your business’s financial position at a given time, listing assets, liabilities, and equity.
In Plain English: It tells you what your business owns, owes, and is worth.
Definition: The movement of money in and out of your business.
In Plain English: How healthy your business’s bank balance is over time. Positive cash flow = good news.
• Payable: Money you owe to suppliers.
• Receivable: Money owed to you by clients or customers.
In Plain English: Payable = outgoing bills. Receivable = unpaid invoices you’re waiting on.
Definition: The reduction in value of an asset over time (e.g. laptops, vehicles).
In Plain English: The value of stuff like computers or machinery goes down — and you can claim it as an expense.
Definition: Tax paid on the profits of limited companies in the UK.
In Plain English: If you run a limited company, this is the tax you owe on your profits — currently 19%-25% depending on income.
Definition: A sales tax added to most goods and services in the UK, currently 20%.
In Plain English: If your turnover is above £90,000, you likely need to register for VAT.
Definition: A portion of profit paid out to shareholders.
In Plain English: As a director/shareholder, you can take a slice of the profits — but within HMRC’s rules.
If you're running a small business, these terms aren't just technicalities — they’re part of the daily decisions you make. Knowing the difference between gross and net profit, or understanding how cash flow works, can help you:
• Avoid cash shortages
• Set realistic goals
• Prepare for HMRC deadlines
• Know when you’re ready to grow or hire
Even if you have an accountant (and we recommend you do!), it helps to know what they’re talking about so you can stay in control.
Want to dive deeper? Check out our Small Business Accounting Services to get tailored support.
Here’s how to stay on top of your numbers:
• Bookmark a cheat sheet – like this one.
• Use accounting software – like Xero or Sage
• Ask questions – no question is too basic.
• Talk to your accountant – we’re here to translate this stuff and help your business thrive.
Mastering a few basic accounting terms UK style doesn’t mean you need to become a chartered accountant. It just means you’re more confident making decisions about your money.
Need help applying these terms to your business? Let’s have a quick chat — book a free consultation today.
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