Accounting and Bookkeeping Service - Industry Lingo

To make the right business purchases, you have to know the language. Here's a guide to accounting industry lingo.

Accounts Payable (A/P)
The record of what your business owes for goods or services.

Accounts Receivable (A/R)
The record of what is owed to your business for goods or services.

Audit
The critical examination of accounting procedures and financial statements to determine whether a company's financial statements are presented in a fair manner and in agreement with generally accepted accounting principles (GAAP).

An audit can also be used to evaluate the management practices of those who are responsible for the company's financial resources and to establish whether transactions have been recorded properly.

Balance Sheet
A snapshot of your company's financial situation, taking into account assets and liabilities. It is a statement of the company's financial position at a given time.

Bank Reconciliation
In a bank reconciliation, an accountant verifies that the balance in the company's checkbook is consistent with the bank statement balance.

Bookkeeping
The basic, systematic method of recording business transactions. This involves keeping track of dates, amounts, and sources of revenues and expenses.

Break-Even Point
The point at which the revenues and expenses are exactly the same. There is neither a profit nor a loss.

Cash Flow Statement
This statement, which is adjusted for non-cash activities, tells you where your cash went for the month, for the year, or for any particular period of time you're documenting.

Certified Public Accountant or CPA
An accountant who has successfully fulfilled a significant level of study and has passed a state examination.

Compilation
Less detailed than a review. It is when an accountant takes your business's general ledger and creates financial statements from it. A compilation does not include any opinion.

General Ledger
Takes all the account information and combines it into one basic, official accounting record of all financial transactions. This is where you draw from to create your financial statements.

Income Statement
Identifies the revenues, expenses, and net income for a set period of time.

Review
Less detailed than an audit. This is smaller in scope and offers just a limited opinion of whether the financial statements fairly represent the company's financial status. This speaks to the reasonability of the financial statements.

The Big Five
Refers to the five major accounting firms: Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG, PricewaterhouseCoopers.

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