Glossary of terms

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Glossary of Financial Terms

Accounts

Statement aggregating items of income and expenditure and assets and liabilities. The accounts may show detailed transactions for every activity (generally used for management and control purposes during a financial year) or be summarised to show the overall position at the end of the period. The latter are known as final accounts and show both the net surplus (profit) or deficit (loss) and a balance sheet of the assets, liabilities and other balances at the end of the accounting period. Authorities are required to publish a Statement of Accounts as specified in the Accounts and Audit Regulations 2003.

Balance sheet

A statement of the assets, liabilities and other balances of an authority at the end of an accounting period.

Balances

Capital or revenue reserves of an authority made up of the accumulated surplus of income over expenditure on the general fund or any other account. Revenue balances may be utilised to provide for unforeseen circumstances, to ensure that payments can be made pending the receipt of income, and if justified they may be used to reduce the collection fund levy.

Capital Expenditure

Generally, expenditure which is of value to an authority in the provision of services beyond the end of the financial year in which it was incurred, e.g. purchase of land and buildings, construction or improvement of buildings.

Capital Financing

The raising of money to pay for capital expenditure. Usually the cost of capital assets is met by borrowing, but capital expenditure may also be financed by other means such as leasing, contributions from the revenue accounts, the proceeds of the sale of capital assets, capital grants, reserves and other contributions.

Capital Financing Costs

Annual charges to the revenue accounts of council services to cover the interest on and repayment of loans raised for capital expenditure.

Capital Reserve

An internal reserve to finance capital expenditure without resort to borrowing. It can be built up by contributions from the revenue account, capital receipts, and repayments of principal and interest.

Capital Receipts

Proceeds from the sale of capital assets. Capital receipts are used to repay the debt on assets financed from loan or to finance new capital expenditure, subject to compliance with statutory requirements.

Usable Capital Receipts

Funds received by an authority from the sale of capital assets that have yet to be used to finance capital expenditure or repay debt.

Creditors

Amounts owed by an authority for work done, goods received, or services rendered but for which payment had not been made at the date of the balance sheet.

Debtors

Sums of money due to the authority but unpaid at the balance sheet date.

Deferred Charges

Capital payments that do not give rise to an asset such as house renovation grants.

Depreciation

The measure of the wearing out, consumption, or other reduction in the useful economic life of a fixed asset, whether arising from use, effluxion of time or obsolescence through technological or other changes.

Fixed Assets

Tangible assets that yield benefits to the local authority and the services it provides for a period of more than one year.

Intangible assets are assets that do not have a physical substance but are identifiable and controlled by the Authority, examples of intangible assets are computer software licences and patents for goods or services.

Operational Assets

Fixed assets held and occupied, used or consumed by the local authority in the direct delivery of those services for which it has either a statutory or discretionary responsibility.

Non-Operational Assets

These are fixed assets held by a local authority, but not directly used for the delivery of services. There are three categories of non-operational assets these are investment properties, assets that are surplus to requirements, pending sale or redevelopment and assets under construction.

General Fund

The main revenue account of a charging authority that summarises the cost of all services provided by the Council.

Prior Year Adjustments

Those material adjustments applicable to prior years arising from changes in accounting policies or from the correction of fundamental errors. They do not include normal recurring corrections or adjustments of accounting estimates made in prior years.

Provisions

Amounts set aside in the accounts for liabilities which are anticipated in the future, but which often cannot be accurately quantified.

Revenue Support Grant

A general grant paid by central government to local authorities to help finance the cost of services. It is paid to charging authorities for credit to the Collection Fund.

Revenue Account

An account which records the day to day expenditure and income of an authority on such items as salaries and wages, running costs of services, the purchase of consumable materials and equipment, and the financing costs of capital assets.

Support Services

An allocation of the net cost of the administrative and professional departments which provide support for all the Council's services (e.g. Executive Services, Finance, Personnel), together with the costs of pooled administrative buildings.

Suspense Account

An account in which the costs of an activity are collected prior to their reallocation to the users of the activity. Any balance on the balance sheet is the amount under or over-recovered at the balance sheet date.

Temporary Loans

Money borrowed for an initial period of less than one year.

Work in Progress

The cost of work done on an uncompleted project at the year-end which had not been recharged at the balance sheet date.