Bad Debts Account: A person or company who is not expected to pay his debt; for example, because the company has gone into liquidation. Bad debts must be written-off and therefore they will reduce profit. A bad debt becomes a bad debt when a business decides it is one, this decision is often based on past experience. Decisions are made by keeping a list of all debtors (aged debtors), and reviewing this list periodically.Bad Debts is account in the nominal ledger to record the value of un-recoverable debts from customers. Real bad debts or those that are likely to happen can be deducted as expenses against tax liability (provided they refer specifically to a customer).
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 expense 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 (aka net worth). In other words, balance sheet is a report that details the various assets and liabilities of a business at a point in time, usually the end of an accounting period. A Balance Sheet must always balance, i.e. debits must always equal the credits.
Balanced Scorecard: A technique that assesses performance across a balanced set of four perspectives; a) customers; b) internal processes; c) organizational learning and; d) growth, and financial.
Bank Loan: An amount of money advanced by a bank that has fixed rate of interest that is charged on the full amount, and is repayable by a specified future date.
Bank Reconciliation: The process of matching and comparing figures from accounting records against those presented on a bank statement. Less any items which have no relation to the bank statement, the balance of the accounting ledger should reconcile (match) to the balance of the bank statement. Bank reconciliation allows companies or individuals to compare their account records to the bank's records of their account balance in order to uncover any possible discrepancies.
Since there are timing differences between when data is entered in the banks systems and when data is entered in the individual's system, there is sometimes a normal discrepancy between account balances. The goal of reconciliation is to determine if the discrepancy is due to error rather than timing.
Balancing Charge: When a fixed asset is sold or disposed of, any loss or gain on the asset can be reclaimed against (or added to) any profits for income tax purposes. This is called a balancing charge.
Bankrupt: If an individual or unincorporated company has greater liabilities than it has assets, the person or business can petition for, or be declared by its creditors, bankrupt. In the case of a limited company or corporation in the same position, the term used is insolvent.
Bankruptcy Petition: A written application to Court by either a debtor or his creditors applying for an order to be made for the debtor to be made bankrupt.
Below the line: This term is applied to items within a business which would not normally be associated with the everyday running of a business. See above the line .
Bill: A term typically used to describe a purchase invoice (eg. an invoice from a supplier).
Bonus Issue: A bonus share is a free share of stock given to current/existing shareholders in a company, based upon the number of shares that the shareholder already owns at the time of announcement of the bonus. While the issue of bonus shares increases the total number of shares issued and owned, it does not increase the value of the company. Although the total number of issued shares increases, the ratio of number of shares held by each shareholder remains constant.
Burn Rate: The rate at which a company spends its money. Example: if a company had cash reserves of $120m and it was currently spending $10m a month, then you could say that at the current 'burn rate' the company will run out of cash in 1 year.