Like any other profession, accountancy has its own specific jargon. Here is a list of some of the more common terms.
Account – this is a record of transactions in the double entry system. There are different types of accounts such as asset account, liability accounts, revenue accounts and expense accounts.
Accountant – an accountant can be described as an individual who does bookkeeping, prepares financial statements for a business or for individuals, and preparing tax returns. The specific duties of the accountant will depend on his field of specialization.
Accounting – the American Institute of Certified Public Accountants (AICPA) describe accounting as the “the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof.” It is basically the work done by accountants.
Accounting firm – this is a business that offers accounting services. The firms are more often than not partnerships. Some of the biggest accounting firms in the world include Deloitte and Touche Tohmatsu, PricewaterhouseCoopers (PwC), Ernst & Young and KPMG.
Accounting period – this is the time period over which financial statements are prepared, and is usually one year.
Accounting standards – these are set rules by which financial statements must adhere to ensure uniformity and consistency in financial reporting. These standards are set by the regulatory body in the particular state. Some of the accounting standard regulatory bodies are the Financial Accounting Standards Board (FASB), Accounting Principles Board (APB), the Securities and Exchange Commission (SEC) and the Committee on Accounting Procedure (CAP).
Assets – these are the valuable things owned by the business. They are classified as either be fixed or current.
Balance sheet – a financial statement that shows the financial position of the business in terms of assets, liabilities and capital. The assets should balance with the liabilities and capital.
Book value – this is the value of an asset in the books of account such as the balance sheet. It is usually different from the actual value of the asset, it can be higher or lower.
Certified Public Accountant (CPA) – a CPA is an accountant who has sat and passed CPA examinations and has fulfilled the necessary regulatory and licensing requirements to practice as an accountant. The licensing requirements may vary from state to state.
Credit – one of the aspects of any financial transaction. A credit accounting entry results in a decrease in the value of a company’s assets or an increase in its liabilities.
Debit – the opposite of a credit and it results in decrease in the liabilities or an increase in assets.
Double entry accounting – type of accounting system that is based on the premise that every financial transaction has two entries in the books of account, a debit and a corresponding credit.
Expenses – these are costs incurred by the business in day to day operations.
Financial accounting – a category of accounting that deal with the gathering of financial information in order to prepare financial statements. The financial statements are used to show the performance of a business entity.
Forensic accounting – a specialized branch of accounting concerned with investigation of financial statements usually for the purposes of litigation.
Income statement – This is also called a profit and loss (P&L) statement. It is basically a listing of the income minus the expenses.
Liabilities – These are any amounts owed by the business to outsiders. Liabilities often result from the acquisition of assets and are either current liabilities (which are payable within a year) or long term liabilities (which can be paid back in more than a year).
Managerial accounting – a branch of accounting concerned with preparation of financial statements for purposes of managerial decision making.
Tax accountant – an accountant who prepares tax returns.