Every business uses acronyms, and accounting is no different. Let’s break down some of the most common accounting acronyms and abbreviations.
This is a common acronym that means Cost of Goods Sold. Essentially, it’s the amount it cost you to acquire the product you’re selling.
Certified Public Accountant. When it’s time for a business to file taxes, or your accountants are dealing with other tax filings, the CPA designation is a necessary, and oftentimes, mandatory part of an accountant’s skill set. Did you know that in Canada, while their acronym is also CPA, it stands for Chartered Professional Accountant?
These are a business’s assets, both Fixed and Current. Fixed Assets are long term and will likely provide benefits to a company for more than one year, such as a real estate, land or major office purchases. Current Assets are those that will be converted to cash within one year, including cash, inventory or accounts receivable.
General Accepted Accounting Principles is an acronym which part of an accountant’s “bible.” They’re the rules and guidelines developed by the accounting industry for companies to follow when reporting financial data. Following these rules is especially critical for all publicly traded companies.
This means General Ledger. This is the business’ complete financial history. It includes assets, liabilities, equity, revenue and expenses. This is a handy thing to have when it comes time to prep financial statements.
Individual Retirement Accounts are savings for retirement. A traditional IRA allows individuals to direct pre-tax dollars toward investments that can grow tax-deferred, meaning no capital gains or dividend income is taxed until it is withdrawn. Roth IRAs are not tax-deductible, but eligible distributions are tax-free, so as the money grows, it’s not subject to tax upon withdrawal.
Life Time Value, while essentially an accounting term, is more in the wheelhouse of marketing and sales—a necessary division of any accounting business. Life Time Value allows you to figure out the value of a customer by multiplying three numbers: the average value of a sale; the number of repeat transactions; and the average retention time of a typical customer.
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