Posted on Mar 25, 2014

How long does it take for your eyes to glaze over when your accountant/bookkeeper starts speaking accounting?




Withholding taxes….

Ahhhhh…..the sound of heads exploding everywhere….

Hang in there, help is here!!

We’ve created our very own Accounting Speak dictionary.  Below, you will find some of the most common accounting terms explained in easy to understand lingo.

So…..Here ya go!

Accounting:  The process of recording, analyzing, and reporting business transactions

Accounting Cycle:  The steps followed during the accounting process

AP or A/P:  Accounts Payable

Accounts Payable:  The amount of money you owe your suppliers/vendors

Accounts Payable Aging:  This is a report listing the names of your suppliers/vendors along with the amounts you owe them.  The amounts will be split into different aging categories based on how long the money has been owed

AR or A/R:  Accounts Receivable

Accounts Receivable:  The amount of money customers owe your business

Accounts Receivable Aging:  This is a report listing the names of your customers along with the amounts they owe you.  The amounts will be split into different aging categories based on how long the money has been outstanding

Accruals:  Revenues earned or expenses incurred that have yet to be invoiced or paid

Accumulated Depreciation:  The total amount of depreciation that has been expensed since an asset was put into use

Adjusting Entries:  Bookkeeping entries recorded at the end of an accounting period

Amortization:  Spreads the cost of an intangible asset over its useful life

Asset:  A type of Balance Sheet account that shows what a business owns

Balance Sheet:  A financial statement that shows total assets, liabilities, and equity at a particular point in time

Breakeven Calculation:  The point where you experience no gain or loss; Revenues = Expenses

Budget:  A projection of revenues and expenses for a specified period.  These numbers are then compared to the actual numbers at the end of that period

CAPX:  Capital Expenditure

Capital Expenditure:  The purchase or upgrade of a Fixed Asset (see below)

Cash Disbursement:  A payment

Cash Flow Statement:  A financial statement that shows the sources and uses of cash over a period of time

Chart of Accounts:  A list of all of the accounts that make up the General Ledger

CR:  Credit

Credit:  Part of an accounting entry that results in increases to liability, equity, and revenue accounts but decreases in asset and expense accounts

Credit Terms:  A buy now, pay later arrangement between a buyer and seller

DR:  Debit

Debit:  Part of an accounting entry that results in increases to asset and expense accounts but decreases in liability, equity, and revenue accounts

Depreciation:  The decrease in an assets value, over time, due to age and wear and tear.  The depreciation process allows a business to expense the cost of the asset over the number of years it plans on using it

Dividend:   A payout of retained earnings to shareholders

Double Entry Accounting:  Every transaction recorded in accounting has at least one debit and one credit.  The double entry accounting system says debits and credits must equal

Equity:  A type of Balance Sheet account showing what’s left to the owners after all debts have been paid

Expense:  A cost incurred to earn income

FA:  Fixed Asset

Fiscal Year:  A 12 month period used to report a business`s yearly numbers.  This may or may not coincide with a calendar year

Fixed Asset:  A physical item like a piece of equipment, office furniture, or building used for a term greater than one year to generate income for the business

GL:  General Ledger

General Ledger:  Think of this as a book that keeps track of all the transactions that flow through your asset, liability, equity, revenue, and expense accounts

Goodwill:  The value of a business over and above its assets

Income Statement:  A financial statement that shows total revenues, total expenses, and net income or net loss over a period of time

Intangible Asset:  An asset you can’t physically touch or feel (patent, trademark, goodwill)

Journal:  This is where transactions are entered

Leasehold Improvements:  Upgrades made to leased business space that make the space more usable (stuff like paint, new flooring, or installation of air conditioning for example).  The improvements are treated as a fixed asset and are depreciated over the life of the lease

Liability:  A type of Balance Sheet account that shows what a business owes

Net Book Value:  Asset Cost – Accumulated Depreciation = Net Book Value of the Asset

Net Income:  The excess of revenues over expenses

Net Loss:  The excess of expenses over revenues

Other Income:  Income earned outside of your normal course of business

Outstanding Cheque:  A cheque that’s been issued but remains un-cashed

Periodic Inventory Method:  A system used to determine inventory on hand via a physical count at the end of an accounting period

Perpetual Inventory Method:  An inventory method that tracks the real-time “ins and outs” of each inventory item

Petty Cash:  A small cash float used to pay for minor expenses

Post:  To record an adjustment or transaction to the proper accounts

PP&E:  Property Plant & Equipment

Prepaid Expense:  Any expense that is paid for before it`s actually incurred

Property, Plant, and Equipment:  Another name for Fixed Assets (see above)

Reconciliation:  A process that balances two like sets of records obtained from two different sources

Retained Earnings:  Income retained by the business

Revenue:  Income from the sale of goods or services

Salvage Value:  The estimated value of a fixed asset at the end of its useful life

TB:  Trial Balance

Trial Balance:  A list showing all of the accounts and balances in the general ledger

Withholding Tax:  Income Tax, Canada Pension, and Employment Insurance amounts withheld from employee pay cheques and remitted to Canada Revenue Agency by an employer

If you’ve been confused by a particular word or phrase that isn’t included on this list, feel free to drop us a line, we’d be happy to decode it for you!

Happy Dictionary = HappyBoss