Bookkeeping acronyms and common terms

by | Dec 15, 2020 | 0 comments

Our top 20 terms and what they mean

It is understandable to get lost whenever accountants and bookkeepers speak in their very own language. Some of the terms are rather lengthy and even confusing for anyone outside our nerdy circles. Shortening them or using their acronyms becomes inevitable to improve the fluidity of any conversation, and of course save us some time.

So, we have compiled a list of the most common abbreviations, and terms used by bookkeepers/accountants including their meanings for you. You can now flow with them during conversations after getting acquainted with our list below.

IM Business Solutions‘ top 20 bookkeeping acronyms/terms and what they mean

1. BS – Balance Sheet
A balance sheet is a financial statement containing details of everything a company owns. This includes its assets, liabilities, and entire worth in equity.

2. E – Equity
Equity is the worth of a company after its liabilities are removed. Investors and owners of a company/business get to dip their hands in the Equity and share it accordingly.

3. Liability
Whatever the company owes is termed a liability. If a company owes anyone as little as $50, that’s a liability.

4. Assets
Everything owned by a company/business that is valuable in monetary terms (can be sold for money) are termed assets.

5. AP – Accounts Payable
All expenses made by a business/company that is yet to be paid for are called accounts payable. They are also liabilities until they are paid and in most cases, they are turned into assets.

6. BV – Book Value
Book value indicates the original worth of an asset before it depreciated in value.

7. COGS – Cost of Goods Sold
Cost of goods sold refers to the amount of money spent in the manufacturing of products by a company. This includes general logistics and payment for manual labour.

8. Inventory
Inventory refers to all the products or assets in a company’s warehouse or possession that are meant to be sold but are yet to be sold.

9. OE – Overhead Expenses
Overhead expenses are expenses involved in running a company/business with the exclusion of expenses directly involved in the production of goods and delivery of services. Rent is an example of an overhead expense.

10. GP – Gross Profit
Gross Profit refers to the total profit of a company/business without including overhead expenses. GP can be calculated by subtracting the cost of goods sold from the total revenue generated.

11. GM – Gross Margin
Gross Margin is calculated in percentage. It is very easy to calculate. Simply divide Gross Profit by total revenue generated and multiply the result by 100.

12. Depreciation
When the value of a company’s asset declines over time, it is termed depreciation. This amounts to losses when the company decides to sell the depreciated assets. Depreciation leads to a drop in price value.

13. NI – Net Income
This is the profits of the company earned in dollars. It is what is left in dollars after all the company’s expenses have been subtracted. These include; COGS, depreciation, taxes, and overhead expenses.

14. IS – Income Statement (Profit and Loss)
An income statement is a financial document showing all the expenses made, revenues generated, and profits made by a company/business over a given period.

15. CPA – Certified Public Accountant
Your accountant probably identifies themselves by this acronym all the time which is a good thing because it means that he/she is a certified accountant by the state. A CPA must have gone through a rigorous process which includes meeting certain requirements and passing the CPA exam. Qualifications may vary per state but it’s never easy in any case, so when next you see your CPA a high five might be nice.

16. CF – Cash Flow
This refers to the revenue or expense that a company anticipates from its business operations. It includes productions, sales, and delivery made within a given timeframe.

17. GL – General Ledger
A general ledger is a financial document that contains all of a company’s financial transactions throughout its existence.

18. TB – Trial Balance
Trial balance is a financial document that separates a company’s credits from its debits in columns. This is to ensure adequate bookkeeping is maintained.

19. CR – Credit
This is part of a double-entry system in bookkeeping. In this kind of system where you have the trial balance statement, the credit column is where you enter any transaction that increases a liability or equity account or decreases an asset or expense.

20. DR – Debit
A debit is the opposite of credit. In the debit column of a trial balance account in a double-entry system, the debit column contains all transactions where there is an increase in an asset or expense account or transactions where there is a decrease in liabilities or equity account.

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