Seven Basic Accounting and Finance Terms, Acronyms and Meanings You must Know

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A main rule for mastering something is to make sure that you understand every inch of it. When it comes to accounting basics, understanding its so-called ‘language’ is very essential. This is also a basic in every craft or trade that you want to master.

 

Those who did not give up on their courses are now enjoying the benefits of studying the accounting language. And since accounting graduates are in great demand these days, those who studied actually reaped the benefits of their perseverance.

Seven Basic Accounting and Finance Terms, Acronyms and Meanings You must Know

It’s alright if you’re new to accounting this time. And in order to help you, these are some terms and acronyms that you must remember, along with its meaning.

 

  1. Certified Public Accountant (CPA) – This is the designation or title given to an accounting graduate who had successfully passed the required CPA exam in their country. After passing such an examination, the accounting graduate will be recognized as a Certified Public Accountant, therefore giving him/her the opportunity to pursue a course-related job.

 

  1. Cash Flow (CF) – This is the revenue that is expected by a business to generate because of their previous activities. A cash flow could become positive, meaning that the business actually profits from such an activity. A negative cash flow, on the other hand, means nothing but a serious business management and activity problem. However, a negative cash flow is also a sign that it’s time to change business activities.

 

  1. Cost of Goods Sold (COGS) – This is the company’s monetary investment spent for the manufacture and making of their products and services. Such expenses usually include the cost of raw materials and manpower used in making it.

 

  1. Generally Accepted Accounting Principles (GAAP) – These are the rules and guidelines set by the accounting industry to be followed by companies and businesses when making records such as financial data reports and the like.

 

  1. General Ledger (GL) – This is the complete record of a company’s financial transactions during the time of its operation. If in case the company or business encounters a financial crisis or anomaly, the company auditor is ordered to examine such record as additional reference.

 

  1. Net Income (NI) – Also known as bottom line or net profit, this is the company’s earnings left after lessening other expenses such as operational costs, taxes, etc.

 

  1. Present Value (PV) – Just as its name suggests, this is the value of money as of this time. Since money’s value is affected by factors such as foreign exchange, inflation and the like, a hundred dollar bill’s value today won’t be as much (or as low) as the value of tomorrow’s hundred dollar bill.

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