Accounting shortly

Accrual Method of  Accounting

Mot business use the accrual method of accounting ,it is usually required by Law,when you issue an invoice on credit that regardless of whether it is paid or not, it is treated as a taxable supply on the date it was issued for income tax purposes or corporation tax for limited companies. The same applies to bills received from suppliers. This does not mean you pay income tax immediately, just that it must be included in that year's Profit and Loss account.

Bad Debts Reserve Account

An account used to record an estimate of bad debts for the year (usually as a percentage of sales). This cannot be deducted as an expenses against tax liability

Balance Sheet.

A summary of all the accounts of a business .Usually prepared at the end of each financial year. The term 'Balance sheet' implies that the combined balances of assets exactly equals the liabilities and equity.


Cash Flow: A report which shows the flow of money in and out of the business over a period of time.

Depreciation: The value of assets usually decreases as time goes by. The amount or percentage it decreases by is called depreciation. This is normally calculated at the end of every accounting period .it is shown in both the profit and Loss account and balance sheet of a business.