Welcome to another episode of Jargon, the new show from Digital Trends that deciphers the complex jargon of various industries into words and concepts the rest of us understand. We’re live each week on Tuesdays with a different set of jargon from a different industry.
On this episode, host Myq Kaplan tries to balance the complex jargon of accounting. With help from Winnie Sun, founding partner and managing director of Sun Group Wealth Partners, he crunches the numbers and attempts to overcome his knowledge debt when it comes to valuing the terms of a very confusing industry.
Join Kaplan and Sun as they dig into the following terms:
- Balance Sheet – Most of us don’t balance an actual checkbook anymore, but for a business, balance sheets are a must. Sun explains, “a balance sheet is just a fancy term for positives and negatives. How much are you bringing in (positive) and how much are you spending (negative)?” It’s all about finding the balance.
- Margins – Most of us think of paper when we hear the word “margin,” but in the world of accounting, it’s a way to measure the positives and negatives from your balance sheet using different criteria. Sun notes that there are “three types of margins: gross, operating , and net,” and explains what exactly each one is measuring.
- Overhead – You can think of “overhead” as the things that keep the roof over your business. “They’re the fixed cost you can’t get away from, such as rent, accounting fees, licenses, inventory” and more, Sun says. Maximizing profits and minimizing loss begins with having a clear idea of your business’s overhead costs.
- Fiduciary – We see it on bank logos or read it in our tax returns, but what does “fiduciary” actually mean? According to Sun, the word connotes “a standard.” It means that reputable workers in the financial industry have “a legal and ethical duty to make the best possible decision for the client.” That means all decisions and advice given should be free from the financial expert’s own personal agendas.
- Audit – By far the least appealing and most feared piece of jargon in the accounting industry is “audit.” But Sun encourages us to see them in a different light, because, as she notes, “audits are good things!” She explains that there are different types of audits, both personal audits and audits of publicly traded companies, and that audits performed on publicly traded companies ensure that stakeholders and investors can continue to trust those companies.
Click here for Digital Trends’ picks for the best accounting software for your small business.
For past episodes of Jargon, go to www.digitaltrends.com/jargon/
