Read This! Accounting Firms in Des Moines, IA Explain Document Terminology You Need to Succeedcustomonecfo
Do you know a balance sheet is? How about the definition of cash flow? Do you know when you’d use a gain and loss sheet as opposed to a profit and loss statement? There are certain accounting terms every business owner needs to know. Read this article and learn 12 accounting document terminologies you need to succeed. Need a Des Moines accountant to help you with your documents? Contact CustomOne CFO & Controllers for all your Des Moines accounting and financial consulting needs.
12 Accounting Document Terms You Need to Know
- Accounts Receivable (AR) - This is how much a client or customer owes to a business once they’ve received their products and/or services have been rendered. You track your AR with invoices due to the client.
- Accounts Payable (AP) - How much money a company owes to their vendors, suppliers and other creditors. Like accounts receivable, APs are due once you receive your goods or services are complete.
- Balance Sheet (BS) - A financial report summarizing your company assets and liabilities. It also reports what amount or percentage of equity an individual or shareholder has in the company. This is a living, breathing document that should be constantly updated by your Des Moines CPA or CFO.
- Cash Flow (CF) - Expect revenue (sales, investments, etc) and/or expenses (labor, depreciation, etc) that your business is expected to generate and/or accrue over a determined period of time.
- Cost of Goods Sold (COGS) - How much it costs to deliver a product or render a service to the end user. This formula takes into account all expenses related to shipping your final product, including customer acquisition costs, raw materials and parts, rent for facilities, amount of labor (both in time and wages) and etc.
- Fiscal Year - A “year’s” time, as determined by a company’s bookkeeping, wherein all profits, expenses and finances are summarized. A fiscal year does not have to start and end with the calendar year. It’s approximately 12 months from when the company year starts until the books are closed on that year. It may be longer or shorter by a few days depending on the accounting needs of the company. The start and end months of a fiscal year are usually affected by when the business was founded or licensed.
- Forecast - An informed estimate on how an entity will financially perform in the future. Forecasts are based on hard data, like how many products you’ve sold before, your proven stake in your market and etc. Forecasting is particularly useful in setting budgets, determining sales expectations and estimating future supply-and-demand of your products or services.
- Gains and Loses Sheet (G&L) - A report used to calculate the profit or loss resulting from foreign currency transactions. For example, if you manufacture your goods in China, and have to convert American dollars into Yen, your final purchasing power is affected by international exchange rates. Since exchange rates fluctuate during any given day, gains and lose sheet identifies when your company makes or loses money during international transactions, and how that affects your accounts payable.
- Profit and Loss Statement (P&L) - This financial report summarizes the complete financial “health” of a business organization. The statement defines a company’s financial position through the review of revenues, costs, and expenses. P&Ls are generated on a regular basis, typically every quarter and then once annually.
- General Ledger - A complete account of all your financial records since your business was founded. This extensive documentation of the lifetime of your business is useful for generating forecasts, soliciting investors and in case you’re audited by the IRS.
- Interim Reports - When a financial report needs to be generated outside of the usual timelines of a P&L, your Des Moines accountant or CFO creates an interim report. These are used to summarize the current finances of a business at any given time. Banks, lenders and other creditors may ask for an interim report before they choose to do business with you. A good interim report can give investors and potential business partners and honest, present-day look at the value of your company.
- Revenue - Any money generated through business activities during a set period of time. Revenue does not account for any business expenses, just the money brought in from selling products and services. This can also be referred to as gross gains or gross business income.