Glossary Accounting Business UK - Glossario Contabilità UK
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Construction Industry Scheme.
A Company Voluntary Arrangement (CVA) can be applied for by the agreement of all directors of the company, the legal administrators of the company, or the appointed company liquidator.
A company voluntary arrangement can only be implemented by an insolvency practitioner who will draft Proposal for the creditors.
A meeting of creditors is held and if 75% (by debt value) of the creditors who vote agree then the CVA is accepted.
All the company creditors are then bound to the terms of the proposal whether or not they voted.
Creditors are also unable to take further legal actions as long as the terms are adhered to, and existing legal action such as a Winding Up Order ceases.
During the CVA, payments are made in a single monthly amount paid to the insolvency practitioner.
The fees charged by the insolvency practitioner will be deducted from these payments. The company is not required to fund any further costs.
A "call" is a demand by the company for part or all of the outstanding sums to be paid.
These payments may not necessarily be made.
Shareholder’s capital employed refers to share capital and reserves only, total capital employed includes long term loans.
Viewed from the other side of the balance sheet, capital employed comprises fixed assets, investments and the net investment in working capital (current assets less current liabilities).
In other words: the total long-term funds invested in or lent to the business and used by it in carrying out its operations.
Limited companies cannot use capital reserve for this purpose.
Sole traders and partnerships can instead, if they wish, record the shortfall as negative goodwill.
This scheme is available for small companies with a turnover below a given threshold.
The cash method is the most simple in that the books are kept based on the actual flow of cash in and out of the business.
Income is recorded when it's received, and expenses are reported when they're actually paid.
Cash accounting is used by many sole proprietors and businesses with no inventory.
From a tax standpoint it is sometimes advantageous for a new business to use cash accounting.
That way, recording income can be put off until the next tax year, while expenses are counted right away.
Such investments must be readily convertible into cash or available as cash within three months.
Profitable businesses can still fail if customers pay more slowly than the business pays its suppliers, so cash flow should always be measured.
A cash flow forecast is often used as part of a business plan.
This makes it useful for determining the short-term viability of a company, particularly its ability to pay bills.
UK companies, except the very smallest, have to publish a cash flow statement for each accounting period.
The layout is regulated by FRS 1. This is a legal requirement, and should not be confused with a cash flow forecast.
A transaction that reflects payment for goods or services where either no invoice has been raised and money is handed over immediately the goods have been received (e.g. buying petrol for a car), or when the invoice is paid as soon as it is received.
This removes the need to post an invoice onto the purchase ledger and the transaction is entered through the cash book.
Instead of the money being paid directly into the bank the money is paid into the Petty Cash account and entered through the cash book.
Hence they are known as group financial statements.
The scheme applies mainly to contractors and subcontractors in mainstream construction work, however businesses or organisations whose core activity isn't construction but have a high annual spend on construction may also count as contractors and fall under the scheme.
The most common type of contra entry is balancing outstanding purchase ledger transactions against outstanding sales ledger transactions where you both sell to and buy from the same company.
For example: you have sold goods to XYZ to the value of £200. You have also bought goods from XYZ to the value of £100.
Overall they owe you £100 (i.e. what they owe you less what you owe them).
A contra entry matches up the £100 you owe them against £100 they owe you.
For example, the debtors control account records the amount of sales recorded in the sales ledger.
It is reduced by receipts from customers also posted through the bank ledger.
Sales less COGS = gross profit. Effectively the same as cost of sales (COS) see below for fuller explanation.
For a manufacturing company, it may mean the cost of producing the goods sold.
Commonly arrived at via the formula: opening stock + stock purchased - closing stock.
Cost of sales is the value, at cost, of the goods or services sold during the period in question, usually the financial year, as shown in a Profit and Loss Account (P&L).
In all accounts, particularly the P&L (trading account) it's important that costs are attributed reliably to the relevant revenues or the report is distorted and potentially meaningless.
To simply use the total value of stock purchases during the period in question would not produce the correct and relevant figure, as some product sold may have already been held in stock before the period began, and some product bought during the period may remain unsold at the end of it.
Some stock held before the period often remains unsold at the end of it too.
The formula is the most logical way of calculating the value at cost of all goods sold, irrespective of when the stock was purchased.
The value of the stock attributable to the sales in the period (cost of sales) is the total of what we started with in stock (opening stock), and what we purchased (stock purchases), minus what stock we have left over at the end of the period (closing stock).
The credit granted in a period can be settled in full or in part by the end of a specified period.
Many credit cards carry no annual fee.
It can also be termed a liquid asset. For example, money in the bank or in petty cash, debtors, prepayments, or stock.
Sometimes a ratio of 2:1 is quoted as being average.
What this means, is that for every £1 of current debt, there is £2 in current assets to meet that debt.
See Acid Test Radio for a comparision without the inclusion of stock.
AVVERTENZE D'UTILIZZO: Il presente glossario contiene una definizione dei termini più frequentemente utilizzati nella contabilità d'impresa nel Regno Unito.
La spiegazione di ciascuno dei termini indicati in questo glossario è di carattere meramente orientativo e priva di valore legale; si raccomanda, quindi, di tenere conto del contesto e dell'evento in cui essi vanno applicati, in quanto il significato loro attribuito potrebbe differire rispetto a quello qui rappresentato.
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