In today’s blog post we are presenting you some common accounting terms, abbreviations and acronyms. You do not need to remember these word by word, we are sure you will find useful at your next meeting with your accountant.
Accounts payable (AP): The sum of money a company owes creditors in return for goods/services they have delivered.
Accounts receivable (AR): The sum of money owed by clients to a business after goods/services have been delivered.
Assets (fixed and current): Current assets are those that will be converted to cash within one year. Fixed assetsare long-term and will likely provide benefits to a company for more than one year, such as a property or machinery.
Asset class: A group of securities that behaves similarly in the marketplace. The three main asset classes are equities/stocks, fixed income/bonds, and cash equivalents/money market instruments.
Balance sheet (BS): A financial report that summarizes a company’s assets, liabilities and owner or shareholder equity.
Capital (CAP): A financial asset or the value of a financial asset, such as cash or goods.
Cash flow (CF): The revenue or expense expected to be generated through business activities over a given of time.
Credit (CR): An accounting entry that may either decrease assets or increase liabilities and equity on the company’s balance sheet, depending on the transaction.
Debit (DR): An accounting entry where there is either an increase in assets or a decrease in liabilities on a company’s balance sheet.
Equity and owner’s equity (OE): Equity is assets minus liabilities.
Expenses: The fixed, variable, accrued or day-to-day costs that a business may incur through its operations.
Insolvency: A state where a company can no longer meet financial obligations with lenders when their debts come due.
General ledger (GL): A complete record of the financial transactions of a company.
Trial balance: A business document in which all ledgers are compiled into debit and credit columns in order to ensure a company’s bookkeeping system is tallied.
Liabilities: A company’s debts or financial obligations incurred during business operations.
Net income (NI): A company’s total earnings, also called net profit.
Profit and loss statement (P&L): A financial statement that is used to summarize a company’s performance and financial position by reviewing revenues, costs and expenses during a specific time.
Return on investment (ROI): A measure used to evaluate the financial performance relative to the amount of money that was invested.
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