Have your eyes ever glazed over when your accountant or CPA is explaining something to you, while you pretend to follow along? Some people may have difficulty admitting that they don’t know what someone is talking about. Often this is out of embarrassment and as a result, they might let their CPA ramble on without actively listening.
The accounting industry uses a lot of specialized terms that can make it difficult for people to follow along if they’re not familiar with the industry. We sometimes see clients struggling to understand some of the terms we use at Faber, and so we look for those glazed-over eyes to see if an understanding check is needed.
Familiarizing yourself with some basic accounting terms will go a long way in helping you follow along when your CPA or accountant is talking. So, here is some terminology, with descriptions, to help you out!
Accounting: The theory and system of setting up, maintaining, and also auditing the books of a firm; the art of analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, etc.
Accounts Payable (AP): A liability to a creditor, carried on an account, usually for purchases of goods and services.
Accounts Receivable (AR): A claim against a debtor, carried on an open account. AR is usually debts due from the sale of goods and services.
Assets: Items of ownership convertible into cash; the items detailed on a balance sheet.
Cash Flow (CF): The sum of the after-tax profit of a business plus depreciation and other non-cash charges. Cash flow, as a result, is an indication of internal funds available for stock dividends, purchase of buildings and equipment, etc.
Chart of Accounts: An exhaustive list of all accounts used by an organization, used to organize and define entries. This list includes each type of record whether an asset, liability, equity, revenue or expense.
Credit (CR): An entry recording a sum received, traditionally listed on the right-hand side or column of an account.
Debit (DR): An entry recording of an amount owed, traditionally listed on the left-hand side or column of an account.
Dividends: A sum of money regularly paid (typically quarterly) by a company to its shareholders out of its profits (or reserves). A dividend is not an expense on the corporation’s income statement.
Expenses: The cost required for something; the money spent on something. As a result, expenses are costs that are matched with revenues on the income statement.
Liability: Being responsible for something, especially by law. In accounting, this is usually a debt or financial obligation. Liabilities also include amounts received in advance for a future sale or service.
Revenues: Income, especially with reference to a company or organization.
At Faber, we’re dedicated to helping you understand your numbers so that you can make the best choices for your company. We will be there every step of the way so we can ensure you’re getting the quality service that your business deserves. Call us today to book an appointment, our partners, Daniel W. Faber and Peter Johnson, and staff are excited to hear from you.
Retrieved from www.dictionary.com
Why Hire a CPA?
Even if you have a small business or a single-person business, there are several good reasons why the services of a CPA are important.
Training and Standards
CPAs not only have the background to tackle all business accounting needs, they also adhere to professional standards that require their use of established practices and regulations. Your attention is focused on growing your business, not trying to navigate changing and complex taxation and financial accounting rules.
Accounting inaccuracies can lead to destructive fines and penalties, so having a professional at your disposal can often save you from making costly mistakes.
You can also check out our other article. Click below to find out what a CPA is, exactly.
What is a CPA?
In general, businesses need financial and tax advisors. However, if you’re wondering about whether to hire a CPA or an accountant, it’s helpful to understand exactly what having a CPA designation means.
The title “Accountant” is generic. It refers to a financial professional who knows accounting rules and regulations, including Generally Accepted Accounting Principles (GAAP).
CPAs, on the other hand, are accountants who have passed rigorous licensing examinations. A CPA designation is internationally recognizable and earning the CPA title demonstrates an incredible commitment to the profession.
Not only do CPA requirements include initial exams, but a Chartered Professional Accountant (CPA) must continually meet licensing requirements set forth by the Chartered Professional Accountants of Alberta (CPA Alberta). This provincial professional organization ensures the high standards for the CPA title are met and maintained and operates under the provincial Chartered Professional Accountants Act.
Want to read more? Click below to find out why you should hire a CPA.
For 18 years, the Chartered Professional Accountants at Faber have been providing quality, caring work to our clients. Whether they are doctors, lawyers, or other professionals, Faber always has the experience necessary to provide the highest quality service.
Our CPA teams not only have the background to tackle difficult client business accounting needs, but we also adhere to the professional standards outlined by CPA Alberta. This way, business owners stay focused on growing their business. By saving time and having professional assistance with finances, businesses have the ability to take on their next major venture.
Filing inaccurate returns can lead to punitive government penalties. Having a professional CPA from Faber at your disposal can save business owners from these types of issues. We keep up to date with all tax law changes and updates to give you the best service possible.
We are a full-service
We feel it is essential to continually professionally educate ourselves to improve our technical expertise, financial knowledge as well as service to our clients. CPA standards are already high, and so we work to raise the bar for the industry by providing exceptional work.
Integrity is a fundamental element of the accounting profession. We pride ourselves on remaining candid and forthright when dealing with a client’s financial information.
Through our constant efforts to remain responsive and open to our clients, we have managed to gain their trust, and as a result, referrals are fueling our growth. Creating strong bonds with many people, businesses, and financial communities is the heart of our company. We couldn’t have done it without all of you.