Accounting and SARS glossary
117 terms defined for South African rules, not imported from an American textbook. Every definition says what the term is and why it matters to you.
- Accrual basis
Recording income when it is earned and expenses when they are incurred, rather than when cash moves. It shows what a month actually cost, even if the invoice is paid later.
- Administrative penalty
A fixed monthly penalty SARS charges for an outstanding return. It repeats every month the return stays outstanding, so it grows quietly until the return is filed.
- Amortisation
Spreading the cost of an intangible asset, such as software or a licence, across its useful life. The intangible equivalent of depreciation.
- Annual financial statements (AFS)
The yearly set of accounts for a business: balance sheet, income statement, cash flow statement and notes. Banks, SARS and buyers all work from them.
Why it matters: Your tax return is built from these, so errors here repeat everywhere.
- Annual leave entitlement
The BCEA minimum is 21 consecutive days of paid annual leave per year, or one day for every 17 days worked. Contracts may be more generous, never less.
- Annual return (CIPC)
A yearly filing confirming a company or close corporation is still active, submitted to CIPC with a fee based on turnover. It is not a tax return.
Why it matters: Skipping it leads to deregistration, which can freeze bank accounts and contracts.
- API integration
A connection that lets two systems exchange data automatically, such as a payroll system posting journals into Xero without anyone retyping them.
- Assessed loss
A tax loss carried forward to set off against future taxable income, subject to the limits in the Income Tax Act.
- Assessment (IT34)
SARS's formal statement of what it calculates you owe, or are owed, after processing a return. The company version is the IT34C.
- Audit vs independent review
An audit is the higher level of assurance and is compulsory for some companies based on their public interest score; an independent review is a lighter engagement for smaller companies. Many owner-managed companies need neither.
- Auto-assessment
An assessment SARS issues automatically to some individual taxpayers from third-party data such as IRP5s and interest certificates. If it is wrong or incomplete, you must file a corrected return within the period SARS allows.
- B-BBEE sworn affidavit
A sworn statement of turnover and black ownership that lets an exempted micro enterprise or qualifying small enterprise prove its B-BBEE level without a verification certificate.
- Balance sheet (statement of financial position)
What the business owns and owes at a single date. It answers 'what is it standing on', where the income statement answers 'how did it do'.
- Bank feed
A daily automatic import of bank transactions into accounting software such as Xero, replacing manual capture from statements.
- Bank reconciliation
Matching every transaction in the accounting records to the bank statement so the two agree exactly. It is the check that nothing is missing, duplicated or invented.
- Basic salary vs cost to company
Basic salary is the cash portion; cost to company adds the employer's contributions and benefits. Quoting one when the employee expects the other causes most pay disputes.
- BCEABasic Conditions of Employment Act
The Basic Conditions of Employment Act, which sets minimum standards for working hours, leave, notice and written particulars of employment.
- Beneficial ownership
The natural people who ultimately own or control a company, even when the shares are held by another company or a trust. The register must be filed with CIPC.
- Body corporate
The legal entity made up of all owners in a sectional title scheme, responsible for common property, levies and insurance, and run by elected trustees.
- Break-even point
The level of sales at which total income equals total costs. Below it you are funding the business; above it you are building it.
- Business rescue
A formal Companies Act process to rehabilitate a financially distressed company under a practitioner, as an alternative to liquidation.
- Capital gains tax (CGT)
Tax on the profit made when an asset is sold, included in taxable income at an inclusion rate that differs for individuals, companies and trusts.
- Cash basis
Recording income and expenses only when money actually moves. Simple, but it hides money owed to you and by you.
- Cash flow forecast
A forward projection of money in and money out, usually weekly for the next 13 weeks. Profitable businesses fail on cash, not on profit.
- CCMACommission for Conciliation, Mediation and Arbitration
The Commission for Conciliation, Mediation and Arbitration, which resolves disputes between employers and employees.
- Chart of accounts
The list of categories transactions are recorded against. A chart designed around how you actually run the business makes reports useful; a generic one makes them noise.
- CIPCCompanies and Intellectual Property Commission
The Companies and Intellectual Property Commission, the registrar of companies in South Africa.
- Cloud accounting
Accounting software running on the provider's servers and reached through a browser, so the books are the same file for you and your accountant, with no server to maintain.
- COIDAReturn of Earnings, ROE
The Compensation for Occupational Injuries and Diseases Act. Employers submit an annual return of earnings and contribute to the fund that covers workplace injuries.
- Contribution margin
Selling price less the variable cost of producing it. It tells you what each sale contributes towards fixed costs and profit.
- Cost of sales
The direct cost of what you sold: stock, materials and direct labour. Gross profit is revenue less this figure.
- Creditors (accounts payable)
Money your business owes to suppliers. Tracking it is what stops a healthy-looking bank balance from being spent twice.
- CSOS
The Community Schemes Ombud Service, which oversees sectional title schemes and HOAs and resolves disputes between owners and trustees.
- Current ratio
Current assets divided by current liabilities. A quick read on whether the business can meet what falls due in the next year.
- Debtors (accounts receivable)
Money owed to your business by customers. Ageing debtors are the most common cause of a cash squeeze in a growing business.
- Debtors days
The average number of days customers take to pay. Cutting it is usually the cheapest source of cash a business has.
- Depreciation
Spreading the cost of an asset across the years it is used, rather than expensing it all at once. SARS allows its own wear-and-tear rates, which often differ from the accounting rate.
- Diesel refund
A refund of part of the fuel levy available to qualifying users such as farming, mining and offshore operations, claimed through the VAT system.
- Directors' duties
Directors must act in good faith, in the company's best interests and with reasonable care. Failing to do so can make a director personally liable, including for tax debts.
- Dividends tax
Tax withheld when a company distributes profit to its shareholders, paid over to SARS by the company rather than the shareholder.
- Donations tax
Tax on the value of property disposed of for no or inadequate consideration, payable by the donor, with an annual exemption for individuals.
- Due diligence
A buyer's detailed examination of a business before purchase: financials, contracts, tax compliance, staff and legal exposure.
- Earn-out
Part of a sale price paid later, dependent on the business hitting agreed results. It bridges a gap between what a seller wants and a buyer will risk.
- Earnings multiple
The factor applied to normalised earnings to arrive at a value. It reflects risk, growth and how dependent the business is on the owner.
- EBITDAEarnings before interest, tax, depreciation and amortisation
Earnings before interest, tax, depreciation and amortisation. A rough proxy for operating cash generation, often used as the base for a valuation multiple.
- Emoluments attachment order
A court order requiring an employer to deduct a debt from an employee's salary. The employer must comply and account correctly for it.
- EMP201
The monthly employer declaration of PAYE, UIF and SDL, due by the 7th of the following month, or the last business day before it.
- EMP501
The employer reconciliation that matches monthly EMP201 declarations, actual payments and the IRP5 certificates issued to employees. Submitted twice a year.
- EMP601
The form used to adjust or reallocate amounts declared on employer returns when a correction is needed.
- Employment tax incentive (ETI)
A reduction in the PAYE an employer pays over, available for qualifying younger employees, claimed through the EMP201.
- Estimated assessment
An assessment SARS raises on its own estimate when returns or supporting documents are not submitted. It is almost always higher than a correctly prepared return.
- Financial year end
The date a business's financial year closes. It determines your tax deadlines, provisional tax dates and when statements are prepared.
- Fixed asset register
The schedule of what the business owns, when it was bought, what it cost and what it is now worth after depreciation.
- Free cash flow
Cash generated by operations after the investment needed to keep the business running. It is what a buyer is really buying.
- Fringe benefit
A non-cash benefit given to an employee, such as a company car, free accommodation or a low-interest loan. Most are taxable and must run through payroll.
- Gearing
How much of the business is funded by debt rather than owners' funds. High gearing magnifies both profit and risk.
- General ledger
The complete record of every transaction, organised by account. Every report in your accounts is ultimately a view of it.
- Goodwill
The part of a business's value that is not in its physical assets: reputation, customer relationships, systems and position. It is what a buyer pays extra for.
- Gross margin
Gross profit as a percentage of sales. Watching it monthly catches pricing and stock problems long before the annual statements do.
- Home owners association (HOA)
The body governing a private estate, funded by levies and run by an elected committee, with rules binding on owners.
- IFRS for SMEs
The reporting framework most owner-managed South African companies use, a simplified version of full IFRS.
- Income statement (profit and loss)
Income less expenses over a period, ending in profit or loss. It shows performance, not cash.
- Input VAT
VAT you paid on qualifying business purchases, which a registered vendor may claim back. Valid tax invoices are the condition, not an optional extra.
Tax · Output VAT · VAT
- IRP5
The annual tax certificate showing what an employee earned and what was deducted. Employees cannot complete their own returns until the employer submits this data.
- IRP6
The provisional tax return used to declare and pay estimated tax during the year.
- IT3(a)
A certificate similar to an IRP5, issued where amounts were paid but no employees' tax was deducted.
- ITR14
The annual income tax return for companies. The individual equivalent is the ITR12.
- Journal entry
A manual adjustment to the ledger, used for depreciation, accruals and corrections. Every journal should have a reason recorded with it.
- Learnership allowance
An additional tax deduction for registered learnership agreements, on top of the salary cost already deducted.
- Levy
The monthly contribution owners pay to a body corporate or home owners association for common expenses and reserves.
- Management accounts
Internal financial reports, usually monthly or quarterly, produced quickly so decisions can be made on current information rather than last year's audited numbers.
- MOIMemorandum of Incorporation
The Memorandum of Incorporation, the founding document setting out how a company is governed, who may do what, and how shares work.
- National minimum wage
The legal minimum hourly rate, reviewed annually. Some sectors have their own determinations that set a higher floor.
- Net asset value
Assets less liabilities. A sensible valuation floor for asset-heavy businesses and a poor one for service businesses.
- Normalised earnings
Profit adjusted to remove one-off items and owner-specific costs, so a buyer can see what the business would earn under normal ownership.
- Objection and appeal
The formal route for disagreeing with a SARS assessment. An objection is lodged first, within the prescribed period; an appeal follows if the objection is disallowed.
- PAYEPay As You Earn
Pay As You Earn: employees' tax withheld from salaries by the employer and paid to SARS monthly.
- Payment arrangement (deferral)
A formal agreement with SARS to settle a tax debt in instalments. It requires up-to-date returns and a case for why full payment now is not possible.
- Payslip
The written statement an employer must give with each payment, showing earnings, deductions and the period. It is a legal requirement, not a courtesy.
- Probation
An agreed initial period for assessing a new employee's suitability. It does not remove the right to a fair procedure before dismissal.
- Provision
An amount set aside for a liability that is likely but not yet certain in amount or timing, such as leave pay or a warranty claim.
- Provisional tax
Paying estimated income tax in instalments during the tax year rather than in one amount afterwards. Companies are provisional taxpayers automatically; individuals become provisional taxpayers when they earn income outside PAYE.
- Provisional taxpayer
A person or company required to pay tax in advance during the year, because income is not fully covered by PAYE.
Tax · Provisional tax · IRP6
- Pty Ltd, NPC, Inc
A private company (Pty) Ltd limits shareholder liability; an Inc is a personal liability company where directors are jointly liable; an NPC is a non-profit company. The choice affects tax, liability and reporting.
- Public interest score (PIS)
A score based on employees, turnover, third-party liabilities and shareholders that determines whether a company needs an audit, an independent review, or neither.
- Public officer
The person SARS holds responsible for a company's tax affairs. Every company must appoint one, and SARS will not deal with anyone else on the company's tax matters.
- Registered office
The address CIPC and SARS use for official correspondence. Notices sent there count as delivered, whether or not anyone reads them.
- Reserve fund
A fund a community scheme must maintain for future maintenance and repairs, separate from the administrative fund used for day-to-day costs.
- Retained earnings
Accumulated profit kept in the business rather than paid out. It is not cash, which is the misunderstanding that causes the most trouble.
- Retrenchment
Dismissal for operational requirements. It has its own consultation process and severance rules, and getting the process wrong is what usually costs employers at the CCMA.
- Ring-fenced loss
An assessed loss from certain secondary trades that SARS restricts, so it can be set off only against future income from that same trade.
- SARS eFiling
SARS's online platform for registering, filing returns and making payments. Your registered representative controls who has access to your profile.
- SDLSkills Development Levy
The Skills Development Levy, payable by employers whose annual payroll exceeds the threshold, declared on the EMP201.
- Section 18A receipt
A receipt from an approved public benefit organisation that allows the donor to claim the donation as a tax deduction, within limits.
- Sectional title
Ownership of a defined section of a building plus a share of the common property, governed by the Sectional Titles Schemes Management Act.
- Small business corporation (SBC)
A company meeting SARS's ownership and turnover requirements, taxed on a reduced sliding scale instead of the flat company rate.
- Small business corporation rates
A reduced sliding tax scale available to companies meeting SARS's ownership, turnover and activity tests. Many owner-managed companies qualify and never claim it.
- Solvency and liquidity test
The Companies Act test a company must pass before paying a dividend, buying back shares or making certain distributions: assets must exceed liabilities and the company must be able to pay its debts as they fall due.
- Suspense account
A holding account for transactions that cannot yet be allocated. A growing suspense balance is a reliable sign that bookkeeping has gone wrong.
- Tax compliance status (TCS)
SARS's confirmation that your tax affairs are in order, issued as a PIN that a third party can use to verify your status. Tenders and many contracts require it.
- Third-party appointment (AA88)
A SARS instruction to your bank or employer to pay a tax debt out of your funds. It arrives without negotiation, which is why outstanding debt should be addressed early.
- Trial balance
A summary of every ledger account balance at a point in time, used to check that the books balance before statements are prepared.
- Trust account
A bank account holding money belonging to clients, such as a body corporate's levies, kept separate from the practice's own funds and reconciled monthly.
- Trustees
Owners elected to run a body corporate between general meetings. They carry fiduciary duties similar to company directors.
- Turnover tax
A simplified tax for very small businesses, calculated on turnover instead of profit, which replaces income tax, and in some cases VAT and dividends tax.
- Two-step authentication
A second proof of identity, usually a code on your phone, required in addition to a password. Xero and SARS eFiling both require it, and it stops the great majority of account takeovers.
- UI-19
The monthly declaration of employees and their earnings submitted to the UIF. Without it, employees struggle to claim benefits.
- UIFUnemployment Insurance Fund
The Unemployment Insurance Fund. Employers and employees each contribute a percentage of remuneration, and employers must also submit monthly declarations of their staff.
- VATValue-Added Tax
Value-Added Tax charged on most goods and services. Registered vendors charge VAT on sales, claim it on qualifying purchases and pay the difference to SARS.
- VAT201
The VAT return submitted for each tax period, usually every two months for smaller vendors and monthly above a turnover threshold.
- Verification
SARS checking the supporting documents behind a return before finalising an assessment. It is routine, not an accusation, but it has strict deadlines.
- Warranties and indemnities
Promises a seller makes about the state of the business, and cover for specific known risks. Most post-sale disputes start here.
- Working capital
Current assets less current liabilities: the money tied up in running the business day to day. Growth consumes it, which is why profitable businesses can run out of cash.
- Year of assessment
The tax year being assessed. For individuals it ends on the last day of February; for companies it ends on the company's own financial year end.
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