Regardless of the career you’re pursuing, you’ll need to learn and understand the specialist jargon used in the industry in order to do your job effectively. To do this, you need to understand the language from the beginning, before you’ve even started your training.
Job titles in the accounting industry are quite different to many other areas, and this, accompanied with a lot of preconceptions means that many people think it’s a complicated field that only specialists can get in to. This isn’t true. In fact, all accountants start from the very bottom, regardless of whether they have a degree in accounting or they start as an apprentice straight from school, they all start as trainees.
As someone new to the industry, you’ll come across a huge number of new terms which may seem intimidating at first. However, the earlier you familiarise yourself with these terms, abbreviations and acronyms, the earlier you’ll get to grips with them and be able to throw yourself head first into a new career.
Accounts Receivable (AR)
Sum of money owed to you by customers after agreed goods or services have been delivered.
A system of recording and reporting on financial information.
Accounts Payable (AP)
Sum of money you owe to creditors (your suppliers) for services or goods that they’ve delivered.
Assets – Fixed and Current (FA and CA)
Current assets will be used within a year. Typically this could be accounts receivable, cash or inventory. Fixed assets provide a long term benefits (lasting more than one year) to a company, for example land, machinery or buildings.
Balance Sheet (BS)
A summary of a company’s assets (what it owns) and liabilities (what it owes), as well as the owner’s equity at a specific point in time.
A financial asset, such as goods or cash, and its value. Working capital is worked out by subtracting current assets from current liabilities.
Cash Flow (CF)
The expense or revenue expected to be generated through activities like manufacturing, sales etc. over a period of time. If a business is to survive the long term, a positive cash flow is essential.
Cost of Goods Sold (COGS)
The expense relating directly to the production of goods sold by a company. This is inclusive of the materials and labour used during production.
An entry onto an account that could either (depending on the transaction) decrease the assets or increase the liabilities and equity on a company’s balance sheet. For companies that use the double-entry method, there will be two entries for every transaction: a credit and a debit.
An entry of either an increase in assets or a decrease in liabilities on a company’s balance sheet.
Expenses – Fixed, Variable, Accrued, Operation (FE, VE, AE, OE)
The costs that a business incurs through its operations, whether they be fixed, variable, accrued or day-to-day. These payments may include payments to banks, suppliers, employees or equipment.
Generally Accepted Accounting Principles (GAAP)
A set of guidelines developed by the accounting industry for companies to use when reporting financial data.
General Ledger (GL)
A record of financial transactions spanning the lifetime of a company.
Liabilities – Current and Long-term (CL, LTL)
The debts or financial obligations a business incurs during business operations. Current liabilities are debts that are payable within a year, for example money owed to suppliers, and long-term liabilities are payable over more than a year – a bank loan for example.
Net Income (NI)
The total earnings of a specific company. This is also known as the ‘bottom line’ and is calculated by subtracting total expenses from total revenues.
Owner’s Equity (OE)
The percentage of stock a person has as ownership interest in a company. These stock owners are usually referred to as shareholders.
Present Value (PV)
How much a future sum of money is worth today. It helps display the value in accepting a sum of money now, rather than the same sum a year from now.
Profit and Loss Statement (P&L)
A financial statement that summarises a company’s performance and financial position through the review of revenue, costs and expenses over a specific period of time.
Return of Investment (ROI)
A measure which evaluates the financial performance of a company in relation to the amount of money that’s been invested over the same period. The result is, more often than not, expressed as a percentage and is calculated by dividing net profit by the cost of the investment.
A career in accountancy is not only something that is valued throughout the world, it’s a career that’s very much in demand. If you’re interested starting a whole new career or just boosting your current qualifications, take a look at some of our online accountancy courses.