General Accounting

51 Most Used Accounting Abbreviations and Acronyms

by Envoice
12 min read
Source: Pexels

Accounting departments appear to speak a foreign language because they do. Most people who work closely with the certified public accountant or chief financial officer would be familiar with the jargon.

However, if you need clarification about all the accounting abbreviations and acronyms you encounter at work, you can work towards becoming more proficient with accounting terms using this list.

1. IASB – International Accounting Standards Board

The IASB is a standard-setting body responsible for developing and publishing the International Financial Reporting Standards and approving interpretations developed by the interpretation committee.[1]

2. FASB – Financial Accounting Standards Board

FASB is the accounting body that issues the US Generally Accepted Accounting Principles that private, public and non-profit companies follow. 

FASB is the US counterpart of the International Accounting Standards Board.[2]

3. IFRS – International Financial Reporting Standards

IFRS is one of the accounting acronyms that you will encounter often. This refers to the accounting standards issued by the IASB. 

Compliance with the IFRS makes business valuation and benchmarking possible. Most countries in Europe use IFRS in preparing their financial reports.

4. ASB – Auditing Standards Board 

ASB is a senior committee of the American Institute of Certified Public Accountants. This group issues auditing standards and practice guidance to ensure objective and high-quality audit and attestation services. [3]

5. IAASB – International Auditing and Assurance Standards Board 

IASB  is a standard-setting body that oversees the issuance of standards auditing, assurance, and quality management designed to increase public confidence in the profession.

6. GAAP – Generally Accepted Accounting Principles

Like the IFRS, GAAP refers to the guidelines for preparing and compiling financial statements. GAAP applies to all companies, but large enterprises regulated by the Securities and Exchange Commission must comply with stricter reporting requirements. 

Generally Accepted Accounting Principles include standards, accounting rules, and procedures. However, most professionals use this term to refer to US GAAP – the standards issued by the Financial Accounting Standards Board.[4]

7. FS – Financial Statements

A company’s financial statements convey the result of the entity’s business operations for a specific period. 

Most companies prepare three types of financial statements: balance sheet, income statement, and statement of cash flows. Decision makers like the CEO, CFO, Certified Management Accountant, manager, or supervisor use these reports for financial planning.

8. BS – Balance Sheet

The Balance Sheet or Statement of Financial Position details the Total Assets, Liabilities, and Equity as of a specific date. Companies may have different formats for presenting the balance sheet, but Total Assets should always equal the sum of the Total Liabilities and Equity.

9. IS – Income Statement

An income statement, also known as the Statement of Financial Performance, reports the total Income, Expenses, Gains, Losses, and Net Income for a certain period. 

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10. P&L – Profit and Loss Statement

Profit and Loss Statement is another name for the Income Statement. 

Source: Pexels

11. CF –  Cash Flow 

Cash Flow measures the cash movement. It is the net amount of inflows and outflows. 

Cash inflows often come from sales, revenues, additional investments, loan proceeds, and other collections. Meanwhile, cash outflows result from financial transactions such as paying loans and expenses or purchasing equipment in cash. 

12. SCI – Statement of Comprehensive Income

The Statement of Comprehensive Income is a summary of the standard net income as reported in the Income Statement and the Other Comprehensive Income. 

OCI includes unrealized gains and losses that are not reported in profit and loss. This statement is often part of the standard financial reported issues by multinational companies. Income reported in OCI may be reclassified as part of the Income Statement in a future period.

13.  WC – Working Capital

Working capital is the difference between the company’s total current assets and the total current liabilities. This amount is the funds available to the business in its day-to-day operation. 

A positive working capital shows that the company can meet current obligations.

14. GL – General Ledger

The General Ledger summarizes all the company’s accounting data for each account type. The general ledger shows the transaction list for each line item under the asset, liability, capital, revenue, or expense account.

General Ledger accounts show the beginning balance for the accounting period, debits and credits to the account based on transactions that happened during the period, and the ending balance of the account. This ending balance will be the basis for the trial balance report.

15. TB – Trial Balance

Trial balance is a report that shows the balances of all general ledger accounts at the end of the period. This report lists all assets, liabilities, equity, income, and expense accounts with their end balance which could either be debit or credit. Preparing the trial balance is an integral part of financial statement preparation.

16. DR – Debit

Debit refers to a bookkeeping entry that increases the balance of a company’s assets and expenses. Any debit made to a liability, equity, or revenue decreases these accounts.

Suppose a company receives a cash payment from the sale of goods; it will record the transaction as follow:

  • Debit cash – this increases total cash
  • Credit revenue – this increases revenue

Debits always appear on the left side of the ledger and should always be equal to the credit side.

17. CR – Credit

Credit is the accounting entry that always appears on the right side of the ledger. Revenue, liability, and equity accounts have a normal credit balance, meaning the total balance increases when the account is credited. Meanwhile, crediting assets and revenue decreases the account’s balance.

If a company borrows money, the accounting entry would be as follows:

  • Debit Cash – this increases the cash account
  • Credit  Loans Payable – this increases the loans payable account

18. JE – Journal Entry

A journal entry records the financial transaction in the books of accounts. Each journal entry contains the date and reference number, the accounts affected and the corresponding debit or credit, and a description of the transaction. 

19. AJE– Adjusting Journal Entry

Adjusting journal entries is a special type of journal entry that happens at the end of the period. Companies can make an AJE to record any unrecognized income or expense or to correct an error made in the previous period.

20. CD – Certificate of Deposit

A certificate of Deposit refers to a savings account that earns interest as long as the funds remain untouched for a specific period. Since it’s possible to convert a CD to cash right away, it belongs to the Current Asset section of the Balance Sheet.

Source: Pexels

21. AR – Accounts Receivable

Accounts Receivable refers to the amount owed to the business for goods delivered or services rendered. AR is part of the company’s financial assets and is part of the Current Assets section of the BS.

22. IOU – I Owe You

An IOU is an informal document acknowledging the existence of a debt. If the money owed is due within one year, it will be a Current Asset section. If not, it is a Non-Current Asset.

23. AP – Accounts Payable

Accounts Payable represent the short-term obligations of a company to suppliers and other creditors. AP includes all purchases made on credit that remain unpaid at the end of the reporting period. AP is under the Liabilities section of the balance sheet.

24. PP&E/PPE – Property, Plant, and Equipment

PPE is an item that appears on the Non-Current Asset section of the balance sheet. Fixed assets like buildings, machinery, equipment, and other capital expenses are part of PPE.

25. BV – Book Value

Book Value refers to the amount remaining after deducting accumulated depreciation from the asset value. 

26. PN– Promissory Note 

A promissory note refers to a written promise issued by the borrower to pay a sum of money on its maturity date. The note specifies the due date, the interest, and the principal owed. 

Promissory notes, considered as the company’s debts, may be part of the short-term or long-term liabilities depending on its maturity date.

27. OE – Owner’s Equity 

Owner’s Equity represents ownership interest. This is what’s left after deducting Total Liabilities from the company’s Total Assets. 

Most small businesses use OE in their balance sheet, but larger companies may have a shareholder equity account instead of an OE.

28. RE – Retained Earnings

Retained Earnings represent the company’s cumulative earnings over time. Retained earnings represent the total retained earnings at the beginning of the period plus any net income or loss less any dividends paid.

29. APIC – Additional Paid-In Capital

APIC is part of the Equity section of the Balance sheet below Common Stock. Additional Paid-in Capital is the difference between the issuance price and the par value. This amount represents how much investors are willing to pay over the share’s par value.

30. FMV – Fair Market Value

FMV refers to the selling price of a product on a market where both buyers and sellers know the asset’s condition and are not under any pressure to buy or sell.

Source: Pexels

31. FVO – Fair Value Option

Fair Value Option refers to the choice offered by accounting standards that allow entities to present the value of an asset or liability using its fair value. Assets with the fair value option may include available-for-sale securities and held-to-maturity instruments. 

32. FIFO – First In, First In

FIFO is a cost inventory management method where items purchased first will be sold first. Likewise, the company will use the price of items purchased first to compute the Cost of Goods Sold. 

33. LIFO – Last In, First Out 

LIFO is a cost inventory method that assumes that most recent purchases were sold first and uses the cost for those products to compute the Cost of Goods Sold. The US GAAP allows the use of LIFO, but the IFRS prohibits this cost inventory method.[5]

34. COGS -Cost of Goods Sold

COGS includes direct expenses related to producing goods, including employee labor hours and materials related to manufacturing products sold by the company

35. DBA – Doing Business As

DBA is an acronym common in the US. “Doing business as” appears in company documents for an entity whose business name differs from its legal and registered name.

36. SG&A – Sales, General, and Administrative

SG&A is often a catchall expense category for expenses not related to producing the product or performing a service. This category may include expenses like advertising, consulting fees, and accounting. 

37. T&E –Travel and Entertainment

T&E expenses appear under the expense section of the Income Statement. This expense category includes spending for business travel and entertaining clients.

38. R&D – Research and Development

R&D is an expense category that often appears in the income statement for companies that invest in researching market trends, technologies, and other innovations to improve their product or service offerings.

39. D&A – Depreciation and Amortization

D&A are non-cash expenses used by accountants to allocate the cost spent to purchase capital assets over their useful life.

40. OPEX – Operating Expenses

OPEX refers to expenses incurred as part of the company’s day-to-day business operations. Operating expenses appear in the income statement and may include payroll, rent, overhead costs, and utilities.

Source: Pexels

41. CGT – Capital Gains Tax

Capital Gains Tax is levied on profit made after selling a capital asset or investment. CGT tax rates and rules may vary from one country to another.

42. PPA – Prior Period Adjustment

PPA often refers to a correction to the financial statements for a prior period. In some cases, companies have to restate the financial statements and show the impact of the PPA on an asset or liability account.

43. CAPEX – Capital Expenses

CAPEX refers to purchases of assets or an asset improvement with a useful life of more than one year. Capital expenditures may include the purchase of buildings and heavy equipment.

44. CM – Credit Memo

Credit memo may refer to two things:

  • An adjustment to the accounts receivable. A credit memo could be a document given to a buyer that reduces the amount of an invoice issued earlier. Companies may issue a credit memo for returned goods.
  • A bank adjustment. Credit memos may be due to adjustments that increase your bank account balance, such as a refund for a bank charge or interest on a deposit.

45. DM – Debit Memo

The debit memo refers to any adjustments made by the bank that decreases your cash balance. Debit memos may include bank service charges and fees.

46. PO – Purchase Order

PO is a source document issued by the purchasing department of a company when placing an order with a supplier. Companies match the PO to invoices upon payment as part of internal control. 

47. LLC – Limited Liability Company

LLC is a business structure for US companies with the financial and legal protection of a corporation and the same tax flexibility as a partnership. [6]

48. Y/E – Year-end

This is one of the accounting terms that may not be too common, but it refers to the closing month for the year.

49. ARR – Adjusted Rate of Return

ARR measures the performance of a company or an investment after adjusting for inflation. Companies use ARR to determine whether they should invest in a project or not based on the future net earnings and the capital cost.

50. EBIT – Earnings Before Interest and Taxes

EBIT is one of the accounting abbreviations you’ll encounter when analyzing earnings reported on the profit and loss statement. EBIT adds back income taxes and interest expense paid to the Net Income reported in the  P&L. 

51. EPS – Earnings Per Share

EPS gauges the company’s financial performance. EPS is based on this formula:

Net Income less Preferred Dividends divided by the weighted average shares of common stock outstanding.

Accounting involves many other terms and abbreviations. Since more accounting teams embrace automation, terms like OCR (Optical Character Recognition) and ML (Machine Learning) are becoming more common. 

While accounting terms may appear intimidating, getting involved in the accounting industry is not that difficult. With intelligent invoice processing solutions like Envoice, accounting becomes less challenging and easier to understand for accountants and non-accountants alike. 

Explore Accounting Automation Solutions from Envoice today!








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