Loughborough

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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 Costing

AJE: Adjusting Journal Entry

AP: Accounts Payable

AR: Accounts Receivable

AT: Asset Turnover

BB: Beginning Balance (see also: EB)

BV: Book Value

CJE: Closing Journal Entry

CM: Contribution Margin (= Sales less Variable Costs)

COGM: Cost Of Goods Manufactured

Cr: Credit

CVP: Cost-Volume-Profit

Dr: Debit

EB: Ending Balance (see also BB)

EPS: Earnings Per Share

EVA: Economic Value Added

FIFO: First In, First Out (see also: LIFO)

FC: Fixed Costs (see also: VC)

FS: Financial Statements

FYE: Fiscal Year End; (e.g.: FYE2010)

GAAP: Generally Accepted Accounting Principles

GL: General Ledger

IS: Income Statement

ISO: International Standards Organization

JE: Journal Entry

JIT: Just In Time

LIFO: Last In, First Out (see also: FIFO)

LOC: Line of Credit

NI: Net Income

OH: Overhead

PL: Profit/Loss Statement

PM: Profit Margin

PVA: Process Value Analysis

RE: Retained Earnings

ROI: Return On Investment

SAG Expenses: Selling, Administrative, and General Expenses

SHE: Stockholders Equity

SP: Sales Price (price of goods/services sold)

TB: Trial Balance

VC: Variable Costs (see also: FC)

WIP: Work-In-Progress

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.

T-Account

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?

Bookkeeping

Bookkeeping is the process of systematically recording the financial transactions of a business, so as to show how the transactions relate to each other. Bookkeeping is largely a mechanical process and does not involve any analysis of the financial transactions, however rather the recording of them.

Traditionally, the records were kept in a book, hence the name bookkeeping. These days, bookkeeping is normally performed using a bookkeeping software package, however the names of the books (daybook, cashbook, journal, and ledger) are still used.

A bookkeeper's function is primarily one of recording transactions in the journal and posting to the ledger, and is sometimes referred to as an accounts clerk.

There are two types of bookkeeping: single entry and double-entry. In single entry bookkeeping, the record of each transaction is carried to either the debit or credit column of a single account. In double-entry bookkeeping, two entries of each transaction are carried to the ledger: one to the debit side, and one to the credit side, of the corresponding account. This is so the two entries can be used to check each other.

Accounting

Accounting is the systematic recording, reporting, andanalysis of financial transactions of a business. As bookkeeping involves making a financial record of business transactions, it is true to say that the role of bookkeeping is encompassed within the scope of accounting, and the bookkeeping system used by a business would form part of the accounting system.

Accounting also includes the preparation of statements concerning assets, liabilities and the operating results of a business.

Accountancy is the occupation related to accounting, and an accountant is the person who does, or at least is responsible for, the work. Accountants often specialize in a particular area of accounting such as taxes, auditing, or management.

In a small company, all of the bookkeeping and accounting tasks may well be performed by a single person. In this situation, that person would normally be referred to as an accountant.

About the Author: John Dixon is a web developer working through his own company John Dixon Technology. As well as providing web development services, John's company also provides a free bookkeeping tool.