Accounting Alphabet Soup: What Accounting Acronyms Actually Mean

Posted on Jun 7, 2017 | 0 comments


At FNG, LLC, we’re about partnering with our clients to ensure they are fully informed about their finances and our accounting strategies. This involves a fair amount of education, as accounting, like other professional services, is full of abbreviations. And sometimes, we forget that not everyone knows these common accounting acronyms and abbreviations.

 

AR (Accounts Receivable)

This is money people owe you, plain and simple.

 

ACCG (Accounting)

Accounting is just such a long word, it needed its own acronym. Because ACCT is something else

 

ACCT (Account)

Account typically refers to a record at a financial institution.

 

AP (Accounts Payable)

This is money you owe people. We know – AR is much more fun to talk about.

 

BS (Balance Sheet)

A financial report summarizing your assets, liabilities, and equity at any given time. When you work with a qualified accountant, your BS isn’t BS.

 

CA (Current Assets)

Assets that will be used within a year, like cash or inventory. Contrast with FA or Fixed Assets.

 

CAP (Capital)

A financial asset and its value, like cash or goods. Almost as much fun as AR.

 

CF (Cash Flow)

Revenues and expenses expected to be generated through business activities, like sales or manufacturing.

 

COGS (Cost of Goods Sold)

Expenses related to producing the goods you sell. Could include raw material, parts, and labor.

 

CR (Credit)

Accounting entry that may either decrease assets or increase liabilities and equities.

 

DR (Debit)

Accounting entry that increases assets or decreases liabilities and equities.

 

FE (Fixed Expenses)

Costs to a business that don’t vary from payment to payment.

GAAP (Generally Accepted Accounting Principles)

A set of guidelines developed by the accounting industry for us to follow when reporting financial data.

 

GL (General Ledger)

The record of financial transactions over the life of the company.

 

LTL (Long-Term Liabilities)

Your company’s financial obligations, payable over a time period longer than a year, like a bank loan.

 

NI (Net Income)

Your company’s total earnings. Also called the ‘bottom line.’

 

OE (Owner’s Equity)

The percentage of company equity that you possess.

 

PV (Present Value)

Today’s value of a future sum of money. Present Value shows us that $100 today is worth more than $100 in the future.

 

P&L (Profit and Loss Statement)

Financial statement that summarizes your company’s revenues, costs and expenses quarterly or annually.

 

ROI (Return on Investment)

Calculated by dividing net profit by the investment cost and expressed as a percentage, ROI measures the financial performance of your decision’s as a business owner.

 

At FNG, LLC, we add your AR and AP to the GL and review your P&L and CF to determine if your current business initiatives have a positive ROI. And now you know what that sentence means.

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