• Michael Intravartolo

Dynamics 365 for Financials - Glossary of Accounting Terms


Accrual Accounting

A method of accounting that records transactions at the time they are incurred as opposed to when the cash is received.

Amortization

The annual amount allowed to be expensed of an intangible asset that is calculated over a predetermined number of years.

Assets - Current

Property that is cash or can be converted to cash within a year.

Assets - Long Term

Property that adds value over more than a year.

Balance Sheet or Statement of Financial Position

Summary of assets, liabilities and equity (capital) or an organization at a point in time.

Cash Accounting

A method of accounting that records transactions at the time the cash is received.

Chart of Accounts

A structured list of all the accounts that can be posted to in the books. The chart of accounts determines the detail to which accounting transactions can be posted.

Cost of Goods/Sales Sold

Any expense directly related to the sale of the product.

Current Assets

Any asset that can be converted into cash within a year.

Current Liabilities

Any debt owed by the organization that is due within 12 months.

Current Ratio

A measure of an organization's liquidity by comparing current assets over current liabilities.

Days Payable Outstanding (DPO)

A metric that defines how quickly vendors are paid. It is calculated as (Accounts Payable/(Cost of Goods Sold x365)).

Days Sales Outstanding (DSO)

A metric that defines how quickly receivables are collected. It is calculated as ((Average AR Balance/Total Credit Sales) x 365). The smaller the number the better.

Debits and Credits

The basic means to record a transaction as either positive or negative.

Depreciation

The annual amount allowed to be expensed of a fixed asset that is calculated over a predetermined number of years.

Double Entry Accounting

The foundation for the current accounting system that dictates that every transaction is recorded with a positive and negative value in the books

EBITDA

Earnings before interest, taxes, depreciation and amortization. This metric defines an organization's profit based on revenues and operation expenses that can be controlled by management.

Equity (owners)

Defines the book value of an organization that is calculated by subtracting liabilities from assets.

ERP

Enterprise Resource Planning software typically includes all of the functionality found in accounting software but extends to non financial resources, processes and reporting.

Financial Accounting

Reporting of the financial health of an organization for an external audience.

Fixed Assets

Physical assets that are long term in nature.

GAAP

Generally Accepted Accounting Principles used primarily in North America to provide guidance to the accounting profession on rules and procedures.

Gross Margin

Gross profit as defined by a percentage.

Gross Profit

Total Income Less Cost of Goods Sold.

IFRS

International Financial Reporting Standards used outside of North America to provide guidance to the accounting profession on rules and procedures.

Intangible Assets

Non-physical assets that are long term in nature such as patents, goodwill, etc.

Inventory Turnover

A metric that defines how many times during the year an organization sells the equivalent of its entire inventory. This metric gives an indication of how efficient the company is in selling its inventory. The calculation is (Total Sales / Inventory).

Long Term Assets

Any asset that will be converted into cash in more than a year.

Long Term Liabilities

Debts owed by the organization that will be paid more than 12 months in the future.

Managerial Accounting

Reporting of the operational health of an organization for an internal audience.

Net Income

Final profit of a company after all revenues and expenses are accounted for.

Operational Earnings

A measurement of an organization's profitability that excludes non-operating expenses such as interest, taxes and depreciation.

Posting

The act of entering one or more transactions into a set of accounting books whether it is done manually or electronically.

Profit and Loss Statement or Income Statement

Summary of revenues and expenses for an organization during a stated period.

Profit Margin

Net income represented as a percentage of total income.

Quick Ratio

A conservative measure of an organization's liquidity that divides current liabilities into cash and cash equivalents but does not include inventory.

Retained Earnings

The accumulation of net income or loss over the years that has been moved to the balance sheet of an organization.

Revenues

Money earned for goods/services in a period.

Sales, General and Administrative Expenses

Expenses related to keeping the organization functioning that not directly related to the sale of products or services (see Cost of Goods Sold)

Trial Balance

A financial statement that includes all chart of account items with their current balances. The debits need to always equal the credits in a Trial Balance.

"T" Accounts

A visual tool used to teach accountants how to correctly post accounting transactions in such a way that debits equal credits and all elements of the transaction have been considered.

Utilization

A metric that measures a billable staff's efficiency in using their available time to perform billable work.

Are you looking for Microsoft Dynamics 365 for Financials support and training? Take a look at our Online Dynamics 365 University at www.dynamics365university.com


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