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CIS: see Construction Industry Scheme.

CVA (Company Voluntary Arrangement): the CVA is a form of composition, similar to the personal IVA (Individual Voluntary Arrangement), where an insolvency procedure allows a company with debt problems or insolvent to reach a voluntary agreement with its business creditors to repay all or part of its corporate debts over an agreed period of time. 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.

Call: when shares are issued only part of their cost is usually paid at the time of application and allotment. A "call" is a demand by the company for part or all of the outstanding sums to be paid.

Called Up Share Capital: the face value of shares for which payment has been requested ("called up"). These payments may not necessarily be made.

Capital: in general, capital is the money invested in the business. Shareholder’s capital employed refers to share capital and reserves only, total capital employed includes long term loans.

Capital Employed: the value of all resources available to the company, typically comprising share capital, retained profits and reserves, long-term loans and deferred taxation. 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.

Capital Expenditure: money spent on the acquisition of an asset, such as premises, motor vehicles, plant or machinery that will be used within the business over a period of years.

Capital Gain: profit made on selling an asset for more than its original purchase price.

Capital Gains Tax (CGT): tax paid on the profit made on selling an asset for more than its original purchase price, i.e. the capital gain.

Capitalisation: the way that a company’s capital is divided into share and loan capital. In this way they can then be released to the Profit and Loss report in instalments over the accounting periods to which they relate.

Capital Redemption Reserve: a 'non-distributable' reserve created when shares are redeemed or purchased other than from the proceeds of a fresh issue of shares.

Capital Reserve: an account that can be used by sole traders and partnerships to place the amount by which the total purchase price paid for a business is less than the valuation of the net assets acquired. Limited companies cannot use capital reserve for this purpose. Sole traders and partnerships can instead, if they wish, record the shortfall as negative goodwill.

Cash: cash balances and bank balances, plus funds invested in 'cash equivalents'.

Cash Accounting: a scheme where VAT is paid on payments and receipts rather than the invoices that you raise. 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.

Cash Book: a book used to record details of cash moving in and out of the bank current account.

Cash Equivalents: temporary investments of cash not required at present by the business, such as funds put on short-term deposit with a bank. Such investments must be readily convertible into cash or available as cash within three months.

Cash Flow: the movement of cash in and out of a business. Profitable businesses can still fail if customers pay more slowly than the business pays its suppliers, so cash flow should always be measured.

Cash Flow Forecast: a report which estimates the cash flow in the future (usually required by a bank before it will lend you money, or take on your account). A cash flow forecast is often used as part of a business plan.

Cash Flow Statement: a cash flow statement is a financial report that shows incoming and outgoing money during a particular period (often monthly or quarterly). It does not include non-cash items such as depreciation. 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.

Cash Payment: 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.

Cash Receipt: a transaction that reflects the receipt of money for goods or a service where either no invoice has been raised (e.g. selling goods over the counter and the money is handed over immediately the goods have been received) or the invoice is paid as soon as it is received thereby removing the need to post an invoice onto the Sales Ledger. 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.

Charge Card: a payment card that requires the cardholder to settle the account in full at the end of the specified period; e.g. American Express and Dinners cards. Holders usually have to pay an annual fee for the card.

Chart of Accounts: a list of all the nominal accounts used by a business. It is used to analyse income, expenditure, assets, liabilities and capital, together with the way such categories are assigned to the Balance Sheet or Profit and Loss report.

Cheque Book: book containing forms (cheques) used to pay money out of a current account.

Clearing: the process by which amounts paid by cheque from an account in one bank are transferred to the bank account of the payee.

Closing Balance: the balance of an account at the end (or close),of an accounting period. This figure is then carried forward to the next accounting period.

Compound Interest: compound Interest is calculated on the basis of the original sum together with interest earned from previous periods.

Consolidation Accounting: this term means bringing together the separate financial statements of a group of companies into a single balance sheet and profit and loss account. Hence they are known as group financial statements.

CIS (Construction Industry Scheme): the Construction Industry Scheme (CIS) sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry. 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.

Company Voluntary Arrangement: see Company Voluntary Agreement.

Contra Entry: an adjustment made to balance transactions in one ledger with another. 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.

Contribution: the difference between sales income and marginal cost. It can also be defined as sales income minus variable cost.

Control Account: accounts to which single balances analysed elsewhere in the accounting system are posted. Often the balances are posted from other ledgers. 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.

Corporate Governance: the exercise of power and responsibility for corporate entities.

Corporation Tax: a tax levied on the profits of UK companies annually.

Cost of Goods Sold (COGS): the directly attributable costs of products or services sold, (usually materials, labour, and direct production costs). Sales less COGS = gross profit. Effectively the same as cost of sales (COS) see below for fuller explanation.

Cost Of Sales: the direct costs incurred as a result of making sales. For a retail company, this may mean the cost of purchasing goods, net of carriage and purchasing discounts, less the movement in the value of the stock. 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).

Credit: one side of the double-entry bookkeeping process, representing negative figures on the Balance Sheet (reductions in assets; increases in liabilities and capital), and income on the Profit and Loss report.

Credit Card: a card enabling the holder to make purchases and to draw cash up to a pre-arranged limit. 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.

Credit Note: sent from the seller to the customer in order to cancel or reverse all or part of an invoice.

Creditors: people and businesses who are owed money by the business.

Creditor / Purchases Ratio: a ratio assessing how long a business takes to pay creditors.

Current Account: a bank account used for regular payments in and out of the bank.

Current Asset: a current asset is an asset where the worth can be easily realised converted into cash within twelve months of the balance sheet date. It can also be termed a liquid asset. For example, money in the bank or in petty cash, debtors, prepayments, or stock.

Current Liability: a current liability is a debt owed by the company, for example, creditors, accruals or an overdraft that are due within the fiscal year.

Current Ratio: this compares assets, which will become liquid within approximately twelve months (i.e. total current assets) with liabilities which will be due for payment in the same period (i.e. total current liabilities) as is intended to indicate whether there are sufficient short-term assets to meet the short term liabilities.

Current Ratio = Current Assets ÷ Current Liabilities: this ratio is an indication of the ability of a business to pay its debts when they fall due. 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.