Accounting-Speak:
An Accounting Glossary for Publishers

Every specialty has terms with precisely defined meanings, which help add clarity while shortening messages. Jargon has a purpose, sometimes. To help translate your accountant's jargon, we present:

Accrual
Recording a transaction without a cash result, because of a probable future event. Example: returns from bookstores -- you may not know which books will come back, but a predictable number will. Record this at the time of sale to avoid over-stating your revenue.

Amortization
Moving an amount from an asset account to an expense account in small pieces over a number of time periods. Example: Plant costs are moved from the pre-paid plant account to the COGS-Plant account over a pre-determined time, based upon a fixed formula.

Assets
Those things you own which can be traded or used to produce income. Examples: Royalty Advances (which will be used up as the books are sold), Cash (traded for . . .), Furniture (you do have to use some to produce your books).

Capitalization
Either the total equity in a company or the process of accumulating an expenditure which is not recorded as an expense at the time of payment for later amortization.

COGS (aka Cost of Goods Sold)
What it costs to produce the items sold. Usually divided into PPB, Plant and Royalty elements because PPB is variable, Plant is fixed, and Royalties are accrued.

Credit
The right side of the ledger. Credit entries reduce assets and expenses, and increase liabilities and revenues. (FYI: Your bank account is credited when you deposit something because it is a liability of the bank's.)

Debit
The left side of the ledger. Reverse the info under credit.

Depreciation
The gradual transfer of the value of higher-priced longer-lived items from long term assets to expense accounts in recognition of their long term contribution to the company's efforts.

Direct Costs
Those that vary in a clear relationship to the revenue stream under consideration. Example: Printing or Plant costs are directly related to book sales, even though one is variable, and one is fixed per title. Rent is not directly related (usually).

Earnings
Profit or Income. The end amount the company gets after all expenses.

EBITDA
Earnings (aka Profit or Income) Before Interest, Taxes, Depreciation, and Amortization.

Elasticity, or Price Elasticity
The change in the number of copies sold for each change in price.

Equity
The difference between a company's total assets and its total liabilities. One component in this item is the amount paid in by the initial owners, another is the accumulated retained earnings (profits not paid to the owners).

Fixed Costs
Those costs which will remain the same no matter whether one or a million items are produced.

Gross Margin
The difference between your revenue and your COGS

Income
Also called Profit, or the bottom line.

Incremental Sales/Expenses
Operations not directly related to your central business, which only require currently unused resources. Example: when a publisher distributes smaller publisher's titles, to use the excess capacity in its warehouse and back-office facilities.

Liability
The value of anything you owe. Example: if you have been paid a retainer, but have not yet performed the service, and the period covered has not yet expired.

Opportunity Cost
The value of the benefit you would have received from the next best use of that resource. Example: if your consulting practice earns you an average of $50/hour, but you choose to use 20 hours to design the cover of your book, you have an opportunity cost of $1,000 for that cover.

Plant Costs
The fixed costs for producing a title. Example: cover art, proofreading, indexing, . . .

PPB
Printing, Paper, Binding and anything else that you pay for each copy printed, whether or not it sells.

PPE
Property, Plant and Equipment. Note: Plant here is NOT the same as Plant Costs above, but means buildings and the like.

Return Reserves
The amount accrued to account for the estimated return of books sold. Note: royalties earned are usually reduced by this as are the company's reported sales.

RFQ (or RFP)
Request for Quotation (or Proposal), a document that publishers send to printers including all of the specifications for printing and shipping, so that the printer can send back a firm price quotation.

Sales
The amount actually billed to a customer, less all projected reductions such as return reserves and bad debt.

Variable Costs
Costs which increase as you print more books. (see PPB above).

 

Is there one I missed? Let me know, and I'll add it post-haste.

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