Jargon Busters: Understanding the Most Common Accounting Lingo in Franchising

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Understanding the most common accounting lingo in franchising

Whether you’re running your own business offering financial services or not, you’ll need to have a good understanding of accounting lingo. Unfortunately, finance is one area of business with quite a lot of jargon, but we’ve created a quick and simple run-down of the franchise accounting terms you should know.


Sales lingo and other industry-related jargon are often unpopular among entrepreneurs, who prefer to speak frankly and clearly with both partners and clients. But knowing how to understand ‘accounting speak’ has real benefits when it comes to managing your business’s finances. 

Without being able to decode technical terms, you may struggle to do your accounting and could even miss valuable opportunities. 

Accounting lingo - key terms explained

    • Abridged accounts - A simplified version of a business’s full financial statements. This document shows a general overview of finances, but doesn’t include net profit or a breakdown of fixed assets, creditors and debtors. 
    • Accounts payable (AP) - Money owed by a business but not yet paid.
    • Accounts receivable (AR) - Money owed by a third party to a business but not yet paid.
    • Accruals - Bills owed but not yet settled, like accounts payable. 
    • Accrual basis - The process of recording accounts payable (see above), rather than actual funds when a business receives them. 

      • Acid test - Also known as ‘quick ratio’; a way to determine a business’s ability to settle short-term debts, taking into account the proportion of liquid assets compared to liabilities.
      • Advance - Part of a loan or bill paid ahead of time.
      • Amortisation - The process of gradually writing off the initial cost of an asset over its lifetime.
      • Annual percentage rate (APR) - The interest a product accumulates over the course of a year, including fees and charges.
      • Assets - Products owned by a business, which cannot release funds unless sold; e.g. property, vehicles, stock and accounts receivable.
      • Audit - An official review of a business’s accounts, sometimes carried out by an independent organisation. They’re more common among large companies, as opposed to small ones.
      • Auditor - Someone who completes an audit (see above). 
      • Bad debt - Money owed by someone who cannot pay it; for example, if they have cut off contact or been declared bankrupt.
      • Balance sheet - A summary of a business’s financial activity and status, including assets, liabilities and equity. 
      • Bookkeeping - The process of recording financial activity in a business, as opposed to accounting, which also involves analysing the transactions.
      • Capital - Money businesses can spend or invest. 
      • Cash basis - The process of recording actual funds when you receive them, rather than accounts payable (see above). 
      • Cash flow - Money going in and out of a business.
      • Cash flow statement - A document detailing how money moves through a business, helping owners to make predictions about future performance.
      • Deficit - The disparity between a business’s debts and assets when it owes more money than it has.
      • Depreciation - The amount an asset decreases in value over a given period.
      • Dividends - A portion of a business’s profit given to shareholders.
      • Double-entry bookkeeping - Recording both debits and credits for every financial transaction, as opposed to single-entry bookkeeping (see below). Each time, you log an opposite entry in a different account to give a full picture of the impact on the business and reduce the chance of errors.
      • Equity - The money invested in a business by its owners or shareholders.
      • Fiscal year - The time period used by individual businesses to finalise their accounts for the past 12 months. Fiscal years vary; some companies work alongside the national tax year, others choose a different period for convenience. 
      • Fixed expenses - Recurring costs at a set price, such as rent, utilities and staff salaries.
      • Forecast - A prediction about how a business will perform in the future, informed by previous financial statements.
      • General ledger - A comprehensive log of every transaction completed within a business since it was first established.
      • Goodwill - An intangible asset associated with a business’s reputation. It usually boosts a company’s asking price when put on the market.
      • In the black - A phrase used to describe businesses turning a profit.
      • In the red - A phrase used to describe businesses in debt.
      • Liability - Another word to describe a debt.
      • Liquid assets - Products a business can easily sell or convert into cash within diminishing their value.
      • Liquidation - When a business closes down. If it’s solvent, it pays creditors; if it’s insolvent, it sells its assets to generate money and pay liabilities. 
      • Master account - A comprehensive record made up of subsidiary logs, such as ‘accounts receivable’. 
      • Net income - All revenue after taking away any expenses and taxes, and considering depreciation.
      • Net profit - All revenue considering expenses and depreciation, but generally not taking tax into account. Sometimes, people say ‘net profit before tax’, which has the same meaning.
      • Operating income - Also known as ‘earnings before interest and taxes’ (EBIT), it describes the amount of profit made through day-to-day operations, taking expenses but not interest or taxes into account.
      • Operational expenses - Costs associated with day-to-day business activity, such as insurance, stationery and software subscriptions.
      • Payroll - A list of all staff members and their salary information.
      • Profit and loss statement - A document summarising income and expenses across a defined period, such as fiscal year (see above). 
      • Revenue - Also described as ‘turnover’, this is the total amount of income generated by a business, before deducting expenses. 
    • Single-entry bookkeeping - The process of recording financial transactions with just one account, either as income or an expense, as opposed to double-entry bookkeeping (see above).
    • Variable expenses - Fluctuating costs, such as property or equipment maintenance, or petrol. 
    • Working capital - The amount of money available within a business to fund ongoing costs, after expenses are deducted. 

    Read on if you’re running your own business…

    Do you ever find yourself wishing you had a comprehensive knowledge of accounting lingo and other franchising jargon? Point Franchise is here to help - every day we publish two brand-new business guides designed to offer insider tips and advice to those in the industry. 

    See our selection of recently published articles or use the search box to start your own research journey. 

    >> Read more articles on the Bookkeeping & Accounting sector

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