Glossary - Definitions

Profit & Loss Account – the annual statement of income and expenditure that shows whether a practice has made an overall gain on its trading performance. It will show the profit or loss that has been made before tax, the tax charge if any, and the subsequent profit after tax that is available for distribution to the owners or shareholders.

Balance Sheet – the statement of the total assets and liabilities of the business at a particular point in time usually the end of the financial year. Assets are divided into fixed assets such as property and equipment and current assets which includes cash in the bank, amounts owed to the practice by its customers and the value of work in progress. The balance sheet balances by showing the net asset position and who owns those assets. Usually this will be the partners or shareholders of the practice.

Cash flow forecast – a rolling statement of all of the cash inflows and outflows for the practice which predicts the month end cash balance for a number of months ahead. This is one of the most important reports for an architect to monitor in order to get a view of when a cash shortage problem may be approaching.

Input VAT – the tax paid to suppliers as a part of the settlement of their invoices.

Output VAT – the tax charged on collected to customers that is added to the practices invoices to clients.

VAT flat rate scheme (FRS) - a VAT simplification scheme offered by HMRC that makes the administration of the quarterly tax return easier and can result in a small gain for the practice.