Understanding Accounting Basics ALOE and Balance Sheets

It measures the percentage of return your assets generate by dividing net profits by the asset’s purchase price. Track ROA to see which assets contribute to the company’s bottom line and which may need to be replaced. Investors calculate earnings per share (EPS) to see if a publicly traded company would be a good investment. This oe accounting finance metric tells investors how profitable the company is by dividing its net income by the total number of outstanding shares.

• ATM (At the money) – A term used in option pricing to describe a situation where the option’s strike price equals the current market price of the underlying security.
• A Collateral Control Center(CCC), in finance operates as part of the loan and credit risk management system, ensuring proper securement and representation of every collateral for loans given.
• There is a possibility that some of these activities will lead to business transactions.
• BAC (Bank of America Corporation) – This entry on our accounting abbreviation list refers to one of the largest banks in the United States.
• Present Value (PV) refers to the current worth of future sums of money based on a designated rate of return.
• As a result of this transaction, the asset (cash) and owner’s equity (expenses) both decreased by $4,000.
• Cash Management (CM) signifies the corporate finance function managing a firm’s liquidity(cash balance and other liquid resources)&financial strategy.

FATCA – Foreign Account Tax Compliance Act

• CMA (Certified management accountant) – A designation awarded by the Institute of Management Accountants to individuals who have met specific requirements in management accounting.
• AP (Abbreviation for accounts payable) – A liability account on a company’s balance sheet representing money the company owes to its suppliers.
• In a double-entry accounting system, every transaction has two sides.
• That makes it essential to know the property taxes by state next time you plan…
• Not a good sign — if you liquidated the company today, it couldn’t pay off its debt.
• ADA (Allowance for doubtful accounts) – An estimate of the amount of money a company expects to lose on its uncollectible accounts.

Accounting Principles Applied (APA), as the name suggests, encompasses the general rules and guidelines applied while crafting financial statements within an organization. An American Depositary Receipt (ADR) signifies ownership in shares of foreign stocks that trade on U.S. exchanges as domestic equities. Asset-backed securities (ABS) are financial products backed by a https://www.bookstime.com/ loan, lease, or receivables against assets other external to real estate and mortgage-backed securities.

Internal Revenue Service (IRS)

Unlike regular accountants, CPAs are licensed to represent clients in IRS proceedings, participate in external audits, and file reports with the Securities and Exchange Commission (SEC). Collections effectiveness index (CEI) is a helpful tool for understanding how effective your AR processes are at collecting customer payments. A high CEI indicates you have strong, effective collection practices. You want CEI to be as high as possible, but most experts say 80% and above is effective.

PSU – Public Sector Unit

The IASB is a private organization overseeing international financial reporting standards (IFRS). Check out the board’s resources to stay up to date on any changes to these standards, especially if you lead a global business. Liabilities are what it owes, and equity is the amount of the company that belongs to the business owner. Check out these basic accounting definitions and start to commit them to memory. That way, when you start your accounting education journey, you’ll already feel like you’re a step ahead and speaking the language. The monthly payment of rent to a landlord, the purchase of equipment from a supplier, and the sale of goods to customers are all examples of external transactions.

• In this guide, we’ll discuss 63 standard accounting abbreviations and acronyms.
• For example, the suppliers will deliver the ordered goods, and the workers will be paid for their efforts.
• This helps to protect the person who wrote the invoice in the event that they unintentionally make a mistake when adding up the final invoice amount or any other aspect of the invoice.
• ICFR (Internal control over financial reporting) – The measures a company takes to ensure that the financial statements for all users of accounting information are accurate and reliable.
• VC (Venture Capital) – Money invested in early-stage businesses in hopes of achieving a high return on investment.
• To help you get started, we compiled an assortment of basic financial terms and acronyms and created this simple accounting glossary for beginners.

What does AP denote in accounting terminology?

Errors and Omissions(E&O) refer to professional negligence, including mistakes, oversights, or carelessness in providing professional services. A Deferred Prosecution Agreement (DPA) is a settlement strategy under HOA Accounting which a prosecutor allows the defendant to avoid prosecution by meeting specific requirements. A Chartered Accountant (CTA) is a designation granted to accounting professionals in many countries worldwide.