by Pi Accountancy | Nov 7, 2024 | Frequently Asked Questions
What is the VAT Threshold? The VAT Threshold is the point at which your business must register for Value Added Tax (VAT) with HMRC. HMRC currently sets this threshold at £85,000 in annual turnover. If your business’ taxable turnover exceeds £85,000 in any...
by Pi Accountancy | Nov 5, 2024 | Frequently Asked Questions
What is Value Added Tax (VAT)? Value Added Tax (VAT) is a consumption tax that applies to most goods and services sold by VAT-registered businesses. It impacts various transactions, including selling goods and services, hiring or loaning goods, and even...
by Pi Accountancy | Oct 29, 2024 | Frequently Asked Questions
What is Deferred Income? A business generates deferred income, sometimes called “unearned income”, when it receives payment in advance for something it has not yet delivered. Officials consider the income “deferred” because the business has not...
by Pi Accountancy | Oct 23, 2024 | Frequently Asked Questions
What is a Trial Balance? A Trial Balance summarises all the debit and credit balances in a company’s accounting system. Typically prepared at the end of an accounting period, such as a month or a year, it is a key step in the accounting cycle. This process helps to...
by Pi Accountancy | Oct 22, 2024 | Frequently Asked Questions
What is Bank Reconciliation? Bank Reconciliation is the process of comparing the transactions recorded in your business’ financial records with the transactions listed on your bank statement. The aim is to ensure that the balances match, and if they don’t,...
by Pi Accountancy | Oct 17, 2024 | Frequently Asked Questions
What is a Company Year End? Your Company Year End depends on your business and typically aligns with the date you registered your company with Companies House. It’s different from the tax year, which runs from 6th April to 5th April. Your Company Year End typically...
by Pi Accountancy | Oct 16, 2024 | Frequently Asked Questions
What is a Financial Year End? A financial year end, also known as a business year end or fiscal year end, marks the end of a 12-month period that businesses use to report their financial performance. This period marks the time when businesses close their accounts and...
by Pi Accountancy | Oct 15, 2024 | Frequently Asked Questions
What is a Tax Year End? The UK Tax Year runs from 6th April until the 5th April of the following year. HMRC uses this timeframe to calculate your liabilities for the year, whether it’s Income Tax, Corporation Tax or Capital Gains Tax. For example: The tax year...
by Pi Accountancy | Oct 10, 2024 | Frequently Asked Questions
What is Solvency? Solvency refers to a business’ ability to meet its long-term financial obligations. Simply, it measures whether a business has enough assets to cover its debts. A solvent business is one that can pay off its liabilities over the long term,...
by Pi Accountancy | Oct 9, 2024 | Frequently Asked Questions
What is Liquidity? Liquidity measures how easily an asset converts into cash without losing value. Consider cash the most liquid asset because you can use it immediately for purchases or paying bills. On the other hand, assets like property or collectibles may take...
by Pi Accountancy | Oct 8, 2024 | Frequently Asked Questions
What are Fixed Assets? Businesses purchase fixed assets as long-term assets for continuous use. Businesses do not intend to resell or convert them into cash quickly. Instead, they support the business over several years. Examples of fixed assets include: Buildings:...
by Pi Accountancy | Oct 3, 2024 | Frequently Asked Questions
What is a Liability? A liability is a debt or obligation a company must settle. This can be in the form of money, goods, or services. You should record liabilities on the right side of the balance sheet; which includes loans, accounts payable, mortgages, deferred...
by Pi Accountancy | Oct 1, 2024 | Frequently Asked Questions
What are Current Assets? Current Assets (CA) are short-term resources that a business owns and expects to convert to cash or use up within one year. Current assets appear first on a company’s balance sheet under the Assets section and support the daily...
by Pi Accountancy | Sep 26, 2024 | Frequently Asked Questions
What is Cash Accounting? Cash accounting, also called cash-basis, is a method of recording income and expenses based on when money actually enters or leaves your business account. This means you record a payment only when you receive it, and an expense only when you...
by Pi Accountancy | Sep 25, 2024 | Frequently Asked Questions
What is Accrual Accounting? Accrual accounting is a method of recording financial transactions when they happen, rather than when money changes hands. This approach helps businesses gain a more accurate picture of their financial health by tracking income and expenses...
by Pi Accountancy | Sep 19, 2024 | Frequently Asked Questions
What is Income Tax? HMRC levies Income Tax on various forms of income earned by individuals, businesses, and other entities, though not all income qualifies as taxable. Taxpayers pay Income Tax directly to HMRC, instead of through indirect collection methods. HMRC...
by Pi Accountancy | Sep 18, 2024 | Frequently Asked Questions
What is Inheritance Tax? Inheritance Tax (IHT) is a tax on the estate of a deceased person. This includes all property, possessions, and money – based on its value at the time of death. At this time, the government charges Inheritance Tax at 40% on the portion...
by Pi Accountancy | Sep 17, 2024 | Frequently Asked Questions
What is Capital Gains Tax? Capital Gains Tax (CGT) is a tax on the profit you make when you sell or dispose of an asset that has increased in value, including assets like stocks, property, and artwork. Additionally, the tax applies to the gain you make, not the total...
by Pi Accountancy | Sep 5, 2024 | Frequently Asked Questions
What are HMRC Penalties? HMRC imposes penalties on taxpayers who fail to comply with their tax obligations. Consequently, these penalties serve as a deterrent to non-compliance and encourage everyone to adhere to tax laws. If you don’t file your tax return on...
by Pi Accountancy | Sep 4, 2024 | Frequently Asked Questions
What is Tax Investigation Insurance? Tax Investigation Insurance is a specialised insurance policy that helps individuals and businesses cover the costs associated with a tax investigation conducted by HMRC. Specifically, HMRC conducts these investigations as routine...
by Pi Accountancy | Sep 3, 2024 | Frequently Asked Questions
What is a Tax Investigation? A tax investigation is not an accusation of wrongdoing but a process to verify that a business or individual complies with HMRC’s tax laws and has paid the correct tax amount. What Triggers a Tax Investigation? Tax investigations can...
by Pi Accountancy | Aug 28, 2024 | Frequently Asked Questions
What is a Cash Flow Statement? A Cash Flow Statement outlines the inflows and outflows of cash and cash equivalents in your business. It provides insights into your company’s liquidity by covering debts and operating expenses without additional financing. Unlike...
by Pi Accountancy | Aug 28, 2024 | Frequently Asked Questions
What is an Income Statement? An Income Statement, also known as a Profit and Loss Statement (P&L), summarises a company’s income and expenses over a specific period. It provides a snapshot of a business’s financial performance and is essential for...
by Pi Accountancy | Aug 27, 2024 | Frequently Asked Questions
What is a Balance Sheet? The Balance Sheet provides a snapshot of a company’s assets, liabilities and equity at a given point in time. This enables stakeholders to assess the financial health and operational results of the business. Moreover, a Balance Sheet is...
