Glossary: Accounting fundamentals

This glossary brings together the key accounting concepts required to understand how a company’s transactions are recorded, structured and presented in its accounts.

Supplier invoice

A document issued by a supplier to formalise the sale of goods or services. It constitutes evidence of a liability for the company, recorded in Accounts Payable and must be retained for at least six years, in line with HMRC requirements, although longer retention periods may apply depending on specific circumstances.

Customer invoice

A document issued by a company to record a sale. It constitutes evidence of a receivable from the customer, recorded in Accounts Receivable and must be retained for at least six years in line with HMRC requirements, particularly for VAT and corporation tax purposes, although longer retention periods may apply in specific circumstances.

Credit note

A corrective document used to cancel or reduce an original invoice. It is typically issued in cases of error, returned goods or commercial adjustments and serves to amend previously recorded accounting entries.

Pro forma invoice

A non-accounting document used for informational or commercial purposes. It corresponds to a detailed quotation without the legal status of an invoice and does not generate any accounting entry until the sale is completed.

Deposit invoice

An invoice issued to record a partial payment before the full delivery of goods or services. It helps secure the transaction and involves specific rules, particularly regarding VAT.

Debit and credit

Fundamental principles of double-entry bookkeeping. Each transaction affects at least two accounts: one is debited, the other credited, ensuring the balance of entries and overall consistency of the accounts.

Accounting entry (journal entry)

The recording of an economic transaction in the company’s accounts. Each entry consists of debit and credit lines and is supported by source documentation, ensuring traceability and compliance.

Accounting journal

A record in which accounting entries are recorded chronologically. It provides a complete history of transactions and is a key component of the audit trail.

General ledger

A document that consolidates all accounting entries by account. It provides a detailed view of movements affecting each account and facilitates analysis and control.

Trial balance

A summary of accounts showing debit and credit balances for each account. It is a key tool for verifying the accuracy of entries and preparing financial statements.

Chart of accounts

A structured framework that organises accounts. It defines the rules for classifying and recording transactions, ensuring consistency and comparability of financial information.

IFRS (International Financial Reporting Standards)

An international set of accounting standards designed to harmonise the presentation of financial statements. They aim to improve transparency, clarity and comparability of financial information across organisations worldwide.