FinancialGlossary
From The Star And Shadow Cinema Wiki
Contents |
On this page:
1. Financial glossary of terms.
2. How to do a bank reconciliation.
3. How to do an international bank transfer.
A SHORT GLOSSARY OF FINANCIAL TERMS
Accruals An estimate of expenditure incurred for a particular period of time which has already passed, but for which an invoice has not yet been received.
Balance Sheet The financial statement showing the overall stored value (or net worth) of an organisation at a particular moment in time.
Bank Reconciliation A check performed to compare the balance in the cash book to the balance on a bank statement, highlighting the items making up the difference between the two (usually cheques which have not yet cleared through the bank).
Bottom Line (The) The final figure on a profit and loss account that results from all the various calculations included on this statement, and thus represents the overall outturn of the business, either surplus/profit or deficit/loss.
Capital The term used for 'where the organisation's money has come from' and thus sometimes used to refer to the bottom part of the balance sheet which shows this.
Capital Expenditure Expenditure on items (known as ‘Fixed Assets’) which will be used for more than 1 year in the business, such as IT equipment, furniture, buildings etc
Cash-flow A document projecting forward an organisation's income and expenditure on a cash basis, phased according to when this money will actually leave the company’s bank account or be received.
Contingency A budgetary figure entered to allow for unforeseen circumstances or events. Conventionally between 5 and 10% of a particular budget area.
Control accounts Accounts prepared to check the accuracy of the sales and purchase ledgers. The control account comprises the total of items posted individually to the ledger accounts.
Credit The process by which an organisation provides goods or services to a customer, but then allows a certain amount of time for them to pay for them.
Credit control
The process by which firms monitor and chase outstanding sums owed to them.
Credit period The time allowed to customers to pay for goods or services received.
Creditors Organisations or people to whom the organisation owes money.
Creditor Days The financial ratio used to assess (on average) how efficient an organisation is in paying its bills and thus meeting its liabilities.
Current Assets Anything owned by the organisation (or owed to it) which the organisation intends to sell or turn into cash in the short-term (or before the next balance sheet is drawn up (i.e. within a year).
Current Liabilities Things that the organisation owes to another organisation that will have to be repaid in the short-term (normally within one year).
Debtors Organisations or people who owe the business money.
Debtors Days Also known as the 'average collection period' this is the financial ratio which shows, on average, how efficient the organisation is at collecting what it is owed.
Deficit The term preferred in Not for Profit organisations to describe a situation where the expenditure incurred by a project (or by the entire organisation) is greater than the income, which has been generated during the same period by this activity. (ie. where Expenditure > Income)
Depreciation A notional figure charged to the organisation's overheads to allow for the reduction in the value of fixed assets over their useful life. These fixed assets are shown on the balance sheet after the relevant change for depreciation has been deducted.
Direct Costs Costs that can be directly attributed or allocated to a particular project or activity (sometimes referred to as Project Costs or 'Cost of Sales').
Expenditure Costs incurred by a project or business, and therefore money that is leaving it.
Fixed Assets
Things that the organisation owns and intends to keep for a medium or long-term period for the purposes of allowing it to carry out its business operations (e.g. premises, equipment, vehicles).
Going Concern The principle upon which accounts are prepared, which assumes that the business will continue trading for the foreseeable future.
Income The money that is being generated and received by the organisation as a consequence of carrying out its operations or receiving funding and subsidy for those operations.
Income & Expenditure Account The term used in 'Not for Profit' organisations for the financial statement used to report on an organisation's activity across a particular period. It therefore fulfils the same purpose as a Profit & Loss Account in a 'For Profit' organisation and shows the interaction between income and expenditure and the resulting outturn (ie. a surplus or a deficit).
Insolvency The situation where an organisation is unable to meet its liabilities. Technical insolvency is happening if the organisation's current liabilities outweigh its current assets. The organisation is 'Legally Insolvent' if its total assets are less than its total liabilities and has no way of trading out of the position.
Liquidity The ability of an organisation to meet its liabilities as they fall due.
Loss The term used in 'For Profit' organisations when income for a project or organisation is less than expenditure.
Net A term meaning 'after something has been deducted from the original figure'. Hence 'Net Current Assets' are the current assets minus current liabilities; Net of VAT is a figure after VAT has been deducted, etc.
Net Current Assets/Liabilities The balance sheet line showing the difference between current assets and current liabilities (net current assets if assets exceed liabilities and net current liabilities if the latter are greater). It also represents the level of working capital the organisation has to hand at the moment to which the balance sheet relates.
Net Worth The overall value of the organisation as depicted on the part of the balance sheet that relates to 'how the money is being used'.
Outturn
The final position of a project or organisation's operations within a particular period, as shown on the Profit and Loss Account (or Income and Expenditure Account).
Overheads The running costs of an organisation (sometimes also referred to as ‘operating costs’ or ‘service delivery costs’), not directly attributable to a particular project or production.
Prepayments Expenditure incurred for a period which has not yet been reached, usually by paying an invoice which relates to a period beyond a month end or year end (eg a rent invoice for the next 12 months)
Profit The term used in 'For Profit' organisations when the income of a project or period of the businesses operations is more than the expenditure relating to it. It is therefore the same concept as the 'Not for Profit' notion of surplus.
Profit & Loss Account The term used in 'For Profit' organisations for the financial statement that shows the interaction between income and expenditure for a particular project or period of the organisation's operations. It thus equates to the 'Income and Expenditure' account used in 'Not for Profit' organisations.
Provision An amount set aside against profit to provide for either the reduction in value of an asset or for liabilities which can’t be determined with any great degree of accuracy.
Reserves The accumulated profits and losses of an organisation.
Surplus The term used in 'Not for Profit' organisations when a project or the overall activities of the organisation within a particular period generates more income than it cost to generate that income. Therefore similar to the 'For Profit' concept of profit, defined as Income being greater than Expenditure.
Turnover Short-hand for sales turnover, this is a measure of the financial scale of an organisation's operation. However, it sometimes can he used to denote the overall level of income, or the overall level of expenditure, and care is needed to assess which measure is being quoted when organisation's or people quote their 'turnover'.
Variance
The difference or gap between what was planned as part of a budget (the budgeted figure) and what actually happened. Used as a tool for budgetary monitoring and control. (Take care not to confuse this type of variance with a 'statistical variance').
Working Capital The amount of money an organisation has to hand to fund its ongoing operations, purchases and to sustain credit transactions offered to customers. Can also be thought of as the money used by an organisation to generate profits or surpluses.
This glossary is courtesy of Pete OHara.
HOW TO DO A BANK RECONCILIATION
The steps you would follow (and it is important that you do them in this order) would be
1. Write up the cash book for both income and expenditure, to the date at which you are doing the bank reconciliation (usually the end of the month in question)
2. ‘Tick off’ each item in the cash book to the bank statement, making sure that the amounts are the same
3. If there is any discrepancy in the amounts, check the item and amend the cash book to reflect the correct amount
4. Check the bank statement for any items you have not ticked – these should simply be ‘direct’ credits and debits (such as Standing Orders, Bank Charges, Bank Interest Received) which you have not recorded in the cash book
5. Write these extra entries into the cash book
6. Add up the Receipts and Payments sides of the cash book again
7. Calculate the final cash book balance, by adding the opening balance at the start of the period, plus the receipts, minus the payments
8. Write down the balance on the bank statement at the date to which you are doing the reconciliation
9. Add up all the receipts which you haven’t ticked in the cash book. These should be the ‘Uncleared Lodgements’ – ie receipts recorded in the cash book, but which haven’t yet cleared through the bank statement
10. Add up all the payments which you haven’t ticked in the cash book. These should be the ‘Unpresented Cheques’ – ie payments recorded in the cash book, but which haven’t yet cleared through the bank statement
11. Add the Uncleared Lodgements to the bank statement balance and deduct the Unpresented Cheques
12. Compare the figure from Step 7 with that from Step 11 – they should be the same. If so, your bank reconciliation balances and you can have comfort that you have recorded the month’s bank transactions accurately
Format of a Bank Reconciliation
Applying the steps above, the resultant Bank Reconciliation Statement is usually similar to the following:
Cash Book Balance at 1 January 5,122 Receipts in month 10,000 Payments in month (12,345) Cash Book Balance at 31 January £2,777
Balance as per bank statement no. 123 at 31 January 13,879
Add: Receipts not yet cleared 500
Less: Payments not yet cleared Chq 123456 (602) Chq 123457 (11,000)
Reconciled balance at 31 January £2,777
INTERNATIONAL BANK TRANSFERS
You need to fax the coop with the below information: fax number: 01618488416
INTERNATIONAL BANK TRANSFER FROM SIDE CINEMA’S ACCOUNT.
Name of beneficiary:
Banking at:
Swift code
IBAN number
The amount:
From: Side Cinema Community Direct Account Acc: Sort Code:
Contact: 0191 2244262 07836 684 220
Signed: By two signatories.
FAX TO 0161 872 0850
Our IBAN number: GB38CPBK08929965101656
Our BIC: CPBKGB22
