32 essential accounting acronyms & their definitions
The business world is awash with acronyms. They’re supposed to make our lives easier ― simplifying communication, minimizing keystrokes, and acting as a quick reference for long-winded names and terms. However, the utility of these acronyms is undermined when you need a business dictionary to decode them. This is a particular problem in accounting and finance, where a plethora of two, three, and four-letter abbreviations can make even elegantly-written sentences look like alphabet soup.
Download Now: 5 Accounts Payable Trends in 2024
We’ve compiled this handy glossary of accounting acronyms to help translate some of the more common abbreviations, so you don’t have to resort to Google next time you forget one.
AP = Accounts Payable
The accounts payable function represents one half of a business’ cash flow. It refers to the funds your business owes vendors and suppliers.
AR = Accounts Receivable
The other half of a business’ cash flow. In this case, the money your business is owed.
BS = Balance Sheet
A report recording your company’s assets, liabilities, and shareholder equity.
CAP = Capital
The total of a business’ assets that hold monetary value, including cash and other financial assets such as property, equipment, and inventory.
CC = Credit Card
Duh.
CF = Cash Flow
The money moving in and out of a business, comprised of revenue (in) and expense (out).
CPA = Certified Public Accountant
A fully-qualified, trusted accounting professional with an accounting license to prove it.
CPE = Continuous Professional Education
Professional credits obtained through specialized training, helping you beef up your credentials and stay at the top of your game.
CFO = Chief Financial Officer
The grand high poohbah of the finance department. C-suite executives charged with strategic input as well as financial planning, cash flow, and more.
CR = Credit
The righthand column of your double-entry ledger. Represents an increase in the liability, revenue, or equity accounts, or a decrease in the asset or expense accounts.
DR = Debit
The opposite of credit, and the lefthand column of your ledger. Represents an increase in the asset or expense account, or a decrease in the liability or equity account.
ERP = Enterprise Resource Planning
Your core accounting software solution: QuickBooks, Sage, Oracle NetSuite, etc.
FS = Financial Statements
The documents that define your company’s financial status. Comprised of the balance sheet, income statement, cash flow statement, and statement of shareholders’ equity.
GAAP = Generally Accepted Accounting Principles
A set of ten key accounting rules and standards set by ― get ready for another acronym ― the Financial Accounting Standards Board (FASB).
GL = General Ledger
The main record of your company’s financial data.
IA = Internal Audit
The process of analyzing and reviewing your financial processes, documents, and information.
IC = Internal Control
The measures and processes by which teams maintain the integrity of their financial information.
ICFR = Internal Controls over Financial Reporting
A specific form of internal control pertaining to financial reporting, designed to ensure a company’s financial statements conform with GAAP.
IS = Income Statement
Also known as a profit-and-loss statement (P&L) or an earnings statement. Displays a company’s revenue, expenses, and taxes ― the latter two subtracted from the former to give a company’s net income or ‘bottom line’.
KPI = Key Performance Indicator
Metrics by which companies can track performance ― usually progress towards a specific goal or target.
LLC = Limited Liability Company
An LLC is a business entity whose structure protects its owners ― or ‘members’ ― from personal responsibility for any debts or liabilities it might accrue.
NI = Net Income
Revenues – (interest + liabilities + taxes), or in other words, the amount your business is making.
PA = Public Accounting/Accountant
An accountant who provides accounting services to other businesses or individuals. As opposed to a private accountant, who works in-house. Public accountants are also known as chartered accountants in some countries.
P&L = Profit and Loss Statement
See: ‘income statement’.
PO = Purchase Order
A document that passes from buyer to seller, stipulating the type of goods or services rendered, as well as quantities and prices.
PV = Present Value
The current value of a future sum of money, as expressed by this slightly headache-inducing formula: FV= PV*(1+i)^n. FV equals future value, PV equals present value, ‘I’ means interest rate and ‘n’ refers to the number of time periods.
ROI = Return on Investment
A measure that determines how much money you’ll make on a particular investment. An investment that offers a strong ROI will quickly begin to pay for itself.
ROR = Rate of Return
The net gain or loss of an investment over time. Here’s another fun formula for you: ROR % = [(CV – IV) / IV] x 100. That’s ‘rate of return’, ‘current value’ and ‘initial value’.
SFP = Statement of Financial Position
See ‘balance sheet.’
SoCF = Statement of Cash Flows
A financial statement that summarizes a business’ cash flow. See: ‘cash flow’.
SoE = Statement of Equity
A financial document that summarizes any changes in equity ― or the money shareholders and owners have invested in the business.
TB = Trial Balance
A list of all your general ledger entries: the debits and credits in your double-entry account book. If they don’t balance, then you know there’s an error.
Next time you see any of the abbreviations IRL, you can use this glossary to quickly determine exactly what they mean. FYI, we regularly update our blog with useful resources and tools for accountants, so drop by soon! Until then, BRB.
Download Now: 5 Accounts Payable Trends in 2024
