You need accurate financial information to help you measure the results of all the hard work that goes into your business. The problem is, your accountant uses more acronyms than your teenage daughter’s text messages. This leaves you feeling frustrated and confused. You can either smile and nod until the conversation ends or spend the next several minutes searching accounting terms online. Who has the patience or time for either of those options?
To save you time and frustration, we’ve compiled a list of common accounting and advisory acronyms, the words they represent, and the meanings behind them. Read these words, store them in the back of your mind, and confidently discuss your financial information from this day forward.
AR (Accounts Receivable) – An asset; money owed to your organization because goods or services have been delivered or provided to a customer.
AP (Accounts Payable) – A liability; money your organization owes to a vendor for good or services you have received.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) – A common measure of a company’s financial performance from its core operating activities.
FIFO (First-In, First-Out) – A method for costing inventory; the oldest cost of an item in inventory will be expensed first as the cost of goods sold (opposite of LIFO below).
FYE (Fiscal Year End) – The end of a company’s 12-month accounting period.
GAAP (Generally Accepted Accounting Principles) – A collection of authoritative standards and commonly accepted ways of accounting for and reporting financial information.
KPI (Key Performance Indicator) – A measure of progress toward a target. Lagging indicators report past results while leading indicators help predict future results.
P&L (Profit & Loss) – A financial statement that reports income, expenses, and net profit (or loss) for a period of time. Also referred to as Income Statement or Statement of Revenues and Expenses.
LIFO (Last-In, First-Out) – A method for costing inventory; the most recent cost of an item in inventory will be expensed as the cost of goods sold (opposite of FIFO above).
Admittedly, there are many more accounting acronyms we could have listed. But, I’m already pushing the limits with the number of words in this article. So, I will end with an acronym that is near and dear to us…
TDT (TDT CPAs and Advisors, P.C.) – One of the top 300 public accounting firms in the United States, TDT has been providing businesses and nonprofit organizations with information and guidance to make smart business decisions since 1975. TDT is the abbreviation for the names of our original founding partners: Theobald, Donohue & Thompson.
Now that you know some of the acronyms, the next step is understanding financials ratios. Check out our article, What Your Financials Say About Your Business.
Courtney is a partner at TDT CPAs and Advisors. She leads the firm’s Assurance practice and business development efforts from TDT’s West Des Moines office and serves on the firm’s executive committee. Courtney has 17 years of experience in public accounting providing audit, accounting and consulting services to a variety of nonprofit organizations and privately-owned businesses. She holds a Bachelor of Arts degree in accounting from the University of Northern Iowa and is a Certified Public Accountant in the state of Iowa. As a firm leader and owner and a nonprofit volunteer board member, Courtney shares firsthand knowledge and experience as she presents at various conferences and seminars across the state.