What Does () Mean in Accounting?
In accounting, parentheses, denoted as (), can have a number of different meanings as shown below.
Negative Numbers
Putting brackets around numbers in accounting signifies that the number is a negative number.
For example:
Net Loss for the Year: (£100,000)
This would typically be shown on the financial statements, and would indicate that the business has incurred expenses exceeding its revenue, resulting in a £100,000 deficit.
Also, if a business bank account is showing (£20,000), it means that the account is £20,000 overdrawn.
Credit Balances
As well as representing negative values, parentheses in accounting can be used to represent credit balances in accounts.
Credit balances typically occur in liability accounts on the Balance Sheet, or Revenue on the Statement of Profit and Loss.
For example:
Revenue P1: (£250,000)
This credit balance would indicate that the business has made £250,000 in P1 revenue.
Another example:
Accounts Payable: (£15,000)
The parentheses around the balance of (£15,000) shows that this account has a credit balance of £15,000, which represents the amount the business owes to its creditors.
Adverse Budget Variances
Parentheses are also used in accounting to signify adverse variances when comparing actual financial results to budgeted numbers.
An adverse variance means that the actual performance falls short of the budgeted expectations, often indicating financial challenges or inefficiencies.
For example:
| Actuals | Budget | Variance |
Revenue: | £21,000 | £25,000 | (£4,000) |
The (£4,000) adverse variance shows that the actual revenue received for the period is less than the budgeted expectation.