Have you ever left a conversation with your accountant with nothing but confusion, asking yourself “What did they just say?” You’re not alone. We’re here to bridge the gap between accountant and client. Here is a list of common terms you will likely here from your accountant, if you haven’t already, and what they actually mean:
Accounts Payable (A/P): Money you owe to others.
Accounts Receivable (A/R): Money others owe to you.
Asset: Items of value owned by a business. This includes money in your bank, A/R, equipment, vehicles, buildings, and so on.
Bad Debt: Uncollectible A/R.
Balance Sheet: A list of company assets, liabilities and equities for the company.
Cost of Goods Sold (COGS) (a.k.a. Cost of Sales—COS): What it directly costs to produce your product or service. For manufacturing companies, this includes raw materials and the direct labor to make your product. For service companies, this includes the cost of labor to directly service your customer.
Equity: How much you have invested into your business or taken out of your business. This is where any profit from your business will show up.
Liability: This includes all the debts you owe to other businesses, such as A/P, credit cards and loans.
Profit and Loss Report (a.k.a. Income Statement): This shows you how well (or not) the business did for a specific time period (month/quarter/year).
Next time you speak with your accountant, you’ll have more of an idea what they’re saying! If you’re ever unsure, don’t be afraid to ask. We are here to make your lives easier.