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- basic bookkeeping and accounting skills that you must have , explanation of t-account, debit and credit, and double-entry accounting system, what is the difference between bookkeeping and accounting?
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Accounting Abbreviations - Helping You Understand Accounting Jargon
Accounting Abbreviations - Helping You Understand Accounting JargonBy David Cusimano
When you start a company or business you quickly find out that you need to understand accounting terms. Whether you are dealing with your accountant, bookkeeper or doing the accounting yourself, you will encounter accounting abbreviations. Most business people have heard of "Accounts Payable" (AP) and "Accounts Receivable" (AR). But what about AJE? That stands for "Adjusting Journal Entry" which you will likely encounter when your accountant is ready to close your accounting books for your business' fiscal year.
I have been in business for several years and have compiled a list below of some of the most common accounting abbreviations and accounting terms that you will encounter. Having this handy list available helps you focus on your business rather than spending excessive time deciphering accounting terms. Even if you use accounting software such as QuickBooks, it is still useful to become familiar with these terms.ABC: Activity Based CostingAJE: Adjusting Journal EntryAP: Accounts PayableAR: Accounts ReceivableAT: Asset TurnoverBB: Beginning Balance (see also: EB)BV: Book ValueCJE: Closing Journal EntryCM: Contribution Margin (= Sales less Variable Costs)COGM: Cost Of Goods ManufacturedCr: CreditCVP: Cost-Volume-ProfitDr: DebitEB: Ending Balance (see also BB)EPS: Earnings Per ShareEVA: Economic Value AddedFIFO: First In, First Out (see also: LIFO)FC: Fixed Costs (see also: VC)FS: Financial StatementsFYE: Fiscal Year End; (e.g.: FYE2010)GAAP: Generally Accepted Accounting PrinciplesGL: General LedgerIS: Income StatementISO: International Standards OrganizationJE: Journal EntryJIT: Just In TimeLIFO: Last In, First Out (see also: FIFO)LOC: Line of CreditNI: Net IncomeOH: OverheadPL: Profit/Loss StatementPM: Profit MarginPVA: Process Value AnalysisRE: Retained EarningsROI: Return On InvestmentSAG Expenses: Selling, Administrative, and General ExpensesSHE: Stockholders Equity
There are many other accounting terms however the above terms are the ones that I have found are a good starting in helping and assisting you understand accounting.
About the Author: DrCr.com ( http://www.drcr.com/ ) is a website with many accounting resources for small business.,
Explanation of T-account, Debit and Credit, and Double-entry Accounting System
Explanation of T-account, Debit and Credit, and Double-entry Accounting SystemBy Igor Voytsekhivskyy
All accountants know several terms that create basis for any accounting system. Such terms are T-account, debit and credit, and double-entry accounting system. Of course, these terms are studied by accounting students all over the world. However, any business person, whether an investment banker or a small business owner, will benefit from knowing them as well. They are easy to grasp and will be helpful in most business situations. Let us take a closer look at these accounting terms.
Accounting records about events and transactions are recorded in accounts. An account is an individual record of increases and decreases in a specific asset, liability, or owner's equity item. Look at accounts as a place for recording numbers related to a certain item or class of transactions. Examples of accounts may be Cash, Accounts Receivable, Fixed Assets, Accounts Payable, Accrued Payroll, Sales, Rent Expenses and so on.
An account consists of three parts:
- title of the account
- left side (known as debit)
- right side (known as credit)
Because the alignment of these parts of an account resembles the letter T, it is referred to as a T account. You could draw T accounts on a piece of paper and use it to maintain your accounting records. However, nowadays, in place of having to draw T accounts, accountants use accounting software (i.e., QuickBooks, Microsoft Accounting, Peachtree, JD Edwards, Oracle, and SAP, among others).
Debit, Credit and Account Balance
In account, the term debit means left side, and credit means right side. These are abbreviated as Dr for debit and Cr for credit. Debit and credit indicate on which side of a T account numbers will be recorded.
An account balance is the difference between the debit and credit amounts. For some types of accounts debit means an increase in the account balance, whilefor others debit means a decrease in the account balance. See below for a list of accounts and what a debit to such account means:
Asset - IncreaseContra Assets - DecreaseLiability - DecreaseEquity - DecreaseContribution Capital - DecreaseRevenue - DecreaseExpenses - IncreaseDistributions - Increase
Credits to the above account types will mean an opposite result.
Double-entry Accounting System
A double-entry accounting system requires that any amount entered into the accounting records is shown at least on two different accounts. For example, when a customer pays cash for your product, an account would show the cash received in the Cash account (as a debit) and in the Sales account (as a credit). All debit amounts equal all credit amounts provided the double-entry accounting was properly followed.
Having a double-entry accounting system has benefits over regular, one-sided systems. One of such benefits is that the double-entry system helps identify recording errors. As I mentioned, if one amount is entered only once in error, then debits and credits won't balance and the accountant will know that one or more entries were not posted fully. Note, however, that this check will help spot errors, however will not identify all cases of errors. For example, equal debits and credits will not identify an error when an amount was posted twice, however was posted to wrong accounts. Keep this in mind when analyzing causes of errors in accounting records.
Igor Voytsekhivskyy is a CPA and CIA working in public accounting. He maintains a website SimpleStudies.com devoted to helping people learn accounting online for free.,
What is the Difference Between Bookkeeping and Accounting?
What is the Difference Between Bookkeeping and Accounting?By John Dixon
What is the difference between bookkeeping, accounting, and accountancy? When someone says they are an accountant, are they really a bookkeeper? Does it really matter?