210 Glossary
Compensating error: A double-entry term applied to a mistake that has
cancelled out another mistake.
Control account: An account held in a ledger that summarises the
balance of all the accounts in the same or another ledger. Typically each
subsidiary ledger will have a control account, which will be mirrored by
another control account in the nominal ledger.
Cook the books: Falsify a set of accounts. See also creative accounting.
Cost accounting: An area of management accounting that deals with the
costs of a business in terms of enabling the management to manage the
business more effectively.
Cost of sales: A formula for working out the direct costs of your sales
(including stock) over a particular period. The result represents the gross
profit. The formula is: opening stock 1 purchases 1 direct expenses 2
closing stock. Also called cost of goods sold when goods are manufac-
tured for re-sale, rather than bought.
Creative accounting: A questionable means of making company figures
appear more (or less) appealing to shareholders, bankers, etc.
Credit: A column in a journal or ledger to record the ‘from’ side of a
transaction (e.g. if you buy some petrol using a cheque then the money is
paid from the bank to the petrol account and you would therefore credit
the bank when making the journal entry).
Credit note: A sales invoice in reverse. A typical example is where you
issue an invoice for £100: the customer then returns £25 worth of the
goods, so you issue the customer with a credit note to say that you owe
the customer £25.
Creditors: A list of suppliers to whom the business owes money.
Creditors control account: An account in the nominal ledger that con-
tains the overall balance of the purchase ledger.
Current assets: Include money in the bank, petty cash, money received
but not yet banked (see cash in hand), money owed to the business by its
customers, raw materials for manufacturing, and stock bought for re-sale.
They are termed ‘current’ because they are active accounts. Money flows
in and out of them each financial year and we will need frequent reports

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