4 Complete removal of an amount due, claims to such resources, transactions

(usually referring to or other events that result in changes

401(k) Plan a tax ABATEMENT a penalty abatemen to those resources and claims.
t or an INTEREST abatement within a
Employee benefit plan authorized by governing agency). Account Payable
Internal Revenue Code section 401(k),
whereby an employer establishes an account Absorption Costing Amount owed to a CREDITOR for
for each participating employee and each delivered goods or completed services.
participant elects to deposit a portion of his An approach to product costing that
or her salary into the account. The amount assigns a representative portion of all Account Receivable
deposited is not subject to income tax. This is types of manufacturing costs--direct
the most common type of salary reduction materials, direct labor, variable Claim against a DEBTOR for an
plans. factory overhead, and fixed factory uncollected amount, generally from a
overhead--to individual products. completed transaction of sales or
A services rendered.
 Accelerated Depreciation
A Misstatement is Inconsequential Accountable Plan
Method that records greater
If a reasonable person would DEPRECIATION than STRAIGHT-LINE Any reimbursement or other expense
conclude after considering the possibility of DEPRECIATION in the early years and allowance arrangement of an employer
further undetected misstatements that the less depreciation than straight-line in that meets all of the following
misstatement either individually or when the later years of an ASSET'S HOLDING requirements (therefore excluding it
aggregated with other misstatements would PERIOD. from gross w-2 EARNED INCOME and
clearly be immaterial to the FINANCIAL tax): (1) it provides reimbursements
STATEMENTS. If a reasonable person could   advances or allowances including per
not reach such a conclusion regarding a Account diem and meals, to employees for any
particular misstatement, that misstatement is job related deductible business
more than inconsequential. Formal record that represents, in expense; (2) employees must be able
words, money or other unit of to substantiate expenses covered in
Abatement measurement, certain resources,
the plan; (3) employee must return accountants' report does not result Senior technical committee of the
any excess advances or payments. from the performance of an AUDIT. AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS (AICPA) which
Accountant Accounting issued pronouncements on accounting
principles from 1959-1973. The APB
Person skilled in the recording and Recording and reporting of financial was replaced by the FINANCIAL
reporting of financial transactions. transactions, including the origination ACCOUNTING STANDARDS BOARD
of the transaction, its recognition, (FASB).
  processing, and summarization in the
Accountants' Report FINANCIAL STATEMENTS. Accounts Payable Subsidiary Ledger

Formal document that communicates Accounting Change A financial record of an individual

an independent accountant's: (1) ACCOUNT PAYABLE in which entries
expression of limited assurance on Change in (1) an accounting principle; can be made daily.
FINANCIAL STATEMENTS as a result of (2) an accounting estimate; or (3) the
performing inquiry and analytic reporting entity that necessitates Accounts Receivable Turnover
procedures (REVIEW REPORT); (2) DISCLOSURE and explanation in
results of procedures performed published financial reports. Used to measure a company’s ability to
(AGREED-UPON PROCEDURES collect cash from credit customers.
REPORT); (3) non-expression of Accounting Cycle Found by dividing net sales by average
opinion or any form of assurance on a net ACCOUNT RECEIVABLE.
presentation in the form of financial The sequence of steps followed in the
statements information that is the accounting process to measure Accrual
representation of management business transactions and transform
(COMPILATION REPORT); or (4) an the measurements into FINANCIAL The recognition of an expense or
opinion on an assertion made by STATEMENTS for a specific period. revenue that has occurred but has not
management in accordance with the yet been recorded.
Statements on Standards for Accounting Principles Board (APB)
Attestation Engagements Accrual Accounting
(ATTESTATION REPORT). An
The attempt to record the financial INTEREST that has accumulated converted into cash to its
effects of transactions and other events between the most recent current liabilities. It is
in the periods in which those payment and the sale of a BOND determined by dividing QUICK
transactions or events occur rather or other fixed-income security. ASSETS by current liabilities.
than only in the periods in which cash
is received or paid by the business,    
using all the techniques developed by Accumulated Depreciation Acquisition
accountants to apply the MATCHING
PRINCIPLE. Total DEPRECIATION pertaining One company taking over
to an ASSET or group of assets controlling interest in another
  from the time the assets were company.
Accrual Basis placed in services until the date
of the FINANCIAL STATEMENT  
Method of ACCOUNTING that or tax return. This total is the Actuary
recognizes REVENUE when CONTRA ACCOUNT to the
earned, rather than when related asset account. Mathematician employed by an
collected. Expenses are insurance company to calculate
recognized when incurred   PREMIUMS, RESERVES,
rather than when paid. Accumulation DIVIDENDS, and insurance,
PENSION, and ANNUITY rates,
  Profits that are not paid out as using risk factors obtained from
Accrued Expense DIVIDENDS but are instead experience tables.
added to the company’s capital
An expense that has occurred base.  
but is not recognized in the Additional Paid in Capital
accounts.  
Acid-Test Ratio Amounts paid for stock in excess
  of its PAR VALUE or STATED
Accrued Interest The relationship of a company’s VALUE. Also, other amounts
current assets that can be paid by stockholders and
 charged to EQUITY ACCOUNTS the extent to which medical journals used for typical period
other than CAPITAL STOCK. expenses, non business casualty transactions (the cash receipts
and theft losses and charitable journal, cash disbursements
  contributions may be deductible. journal, the payroll journal, sales
Adjusted Basis It is also an important figure in journal and so on) the entry is
the basis of many other posted to the general ledger
After a taxpayer's basis in individual planning issues as accounts directly and usually
property is determined, it must well as a key line item on the IRS will be numbered itself, dated
be adjusted upward to include form 1040 and required state and have an explanation.
any additions of capital to the forms. Example: AJE# 1 12-31-2003,
property and reduced by any debit Cash in bank $1,000.
returns of capital to the   Credit interest income $1,000, to
taxpayer. Additions might Adjusted Trial Balance record interest income on
include improvements to the business bank account at year
property and subtractions may A trial balance prepared after all end, not recorded in cash
include depreciation or adjusting entries have been receipts journal but credited by
depletion. A taxpayer's adjusted recorded and posted to the the bank. (Cross-reference bank
basis in property is deducted accounts. Should have equal reconciliation and account
from the amount realized to find credit and debit totals. where it was found)
the gain or loss on sale or
disposition.    
Adjusting Journal Entry ADR
 
Adjusted Gross Income An accounting entry made into a Receipts for shares of foreign
subsidiary ledger called the company stock maintained by an
Gross income reduced by General journal to account for a intermediary indicating
business and other specified periods changes, omissions or ownership.
expenses of individual other financial data required to
taxpayers. The amount of be reported "in the books" but  
adjusted gross income affects not usually posted to the Adverse Opinion
 Expression of an opinion in an beneficiary in due course or at a  
AUDITORS' REPORT which specified time. Allowance for Doubtful Accounts
states that FINANCIAL
STATEMENTS do not fairly   A contra-asset account used to
present the financial position, AICPA reduce ACCOUNTS RECEIVABLE
results of operations and cash to the amount that is expected to
flows in conformity with National professional be collected in cash.
GENERALLY ACCEPTED membership organization that
ACCOUNTING PRINCIPLES represents practicing  
(GAAP). CERTIFIED PUBLIC Alternative Dispute Resolution
ACCOUNTANTS (CPAs). The
  AICPA establishes ethical and An alternative to formal
Affiliated Company auditing standards as well as litigation which includes
standards for other services techniques such as arbitration,
Company, or other organization performed by its members. mediation, and a non-binding
related through common Through committees, it develops summary jury trial.
ownership, common control of guidance for specialized
management or owners, or industries. It participates with  
through some other control the FINANCIAL ACCOUNTING Alternative Minimum Tax (AMT)
mechanism, such as a long-term STANDARDS BOARD (FASB) and
LEASE. the GOVERNMENT Tax imposed to back up the
ACCOUNTING STANDARDS regular income tax imposed on
  BOARD (GASB) in establishing CORPORATION and individuals
Agency Fund accounting principles. to assure that taxpayers with
economically measured income
Fund consisting of ASSETS   exceeding certain thresholds pay
where the holder agrees to remit Allocate at least some income tax.
the assets, income from the
assets, or both, to a specified To set aside for a specific reason.  
American Depository Receipt (ADR)
 Receipts for shares of foreign Gradual and periodic reduction  
company stock maintained by an of any amount, such as the Analytical Procedures
intermediary indicating periodic writedown of a BOND
ownership. premium, the cost of an Substantive tests of financial
intangible ASSET or periodic information which examine
  payment Of MORTGAGES or relationships among data as a
American Institute of Certified other DEBT. means of obtaining evidence.
Public Accountants (AICPA) Such procedures include: (1)
  comparison of financial
National professional AMT information with information of
membership organization that comparable prior periods; (2)
represents practicing Tax imposed to back up the comparison of financial
CERTIFIED PUBLIC regular income tax imposed on information with anticipated
ACCOUNTANTS (CPAs). The CORPORATION and individuals results (e.g., forecasts); (3) study
AICPA establishes ethical and to assure that taxpayers with of relationships between
auditing standards as well as economically measured income elements of financial
standards for other services exceeding certain thresholds information that should conform
performed by its members. pay at least some income tax. to predictable patterns based on
Through committees, it develops the entity's experience; (4)
guidance for specialized   comparison of financial
industries. It participates with Analyst information with industry
the FINANCIAL ACCOUNTING norms.
STANDARDS BOARD (FASB) and Person in a brokerage house,
the GOVERNMENT bank trust dept., or mutual fund  
ACCOUNTING STANDARDS group who studies a number of Annual Report
BOARD (GASB) in establishing companies and makes buy or
accounting principles. sell recommendations on the Report to the stockholders of a
securities of particular company which includes the
  companies and industry groups. company's annual, audited
Amortization BALANCE SHEET and related
 statements of earnings, Senior technical committee of  
stockholders' or owners' equity the AMERICAN INSTITUTE OF Assertion
and cash flows, as well as other CERTIFIED PUBLIC
financial and business ACCOUNTANTS (AICPA) which Explicit or implicit
information. issued pronouncements on representations by an entity's
accounting principles from management that are embodied
  1959-1973. The APB was in financial statement
Annuity replaced by the FINANCIAL components and for which the
ACCOUNTING STANDARDS AUDITOR obtains and evaluates
Series of payments, usually BOARD (FASB). evidential matter when forming
payable at specified time his or her opinion on the entity's
intervals.   financial statements.
Appreciation
   
Anti-Dilution Increase in the value of an Asset
ASSET such as a stock, BOND,
Condition that may increase the commodity, or real estate. An economic resource that is
computation of EARNINGS PER expected to be of benefit in the
SHARE (EPS) or decrease loss   future. Probable future
per share solely because of the Assembly of Financial Statements economic benefits obtained as a
inclusion of COMMON STOCK result of past transactions or
equivalents, such as STOCK The providing of various events. Anything of value to
OPTIONS, WARRANTS, accounting or data-processing which the firm has a legal claim.
convertible DEBT or convertible services by an accountant, the Any owned tangible or
PREFERRED STOCK, nomination output of which is in the form of intangible object having
or selection of the independent financial statements ostensibly economic value useful to the
AUDITORs. to be used solely for internal owner.
management purposes.
   
APB Asset Turnover
 A way of measuring how that provides the support for the BALANCE or class of
profitably and efficiently assets auditor's representations, transactions for the purpose of
are being used to produce sales. whether those representations evaluating some characteristic
This is determined by dividing are contained in the auditor's of the balance or class.
net sales by average total assets. report or otherwise. (May be
referred to as work papers or  
  working papers). Auditing Standards
At Par
  Guidelines to which an AUDITOR
At a price equal to the face, or Audit Engagement adheres. Auditing standards
nominal, value of a security. encompass the auditor's
Agreement between a CPA firm professional qualities, as well as
  and its client to perform an his or her judgment in
Audit AUDIT. performing an AUDIT and in
preparing the AUDITORS'
A professional examination of a   REPORT. Audits conducted by
company’s financial statement Audit Risk independent CERTIFIED PUBLIC
by a professional accountant or ACCOUNTANT (CPA) usually in
group to determine that the The risk that the AUDITOR may accordance with GENERALLY
statement has been presented unknowingly fail to modify ACCEPTED AUDITING
fairly and prepared using appropriately his or her opinion STANDARDS (GAAS), which
GENERALLY ACCEPTED on financial statements that are consist of standards approved
ACCOUNTING PRINCIPLES materially misstated. and adopted by the membership
(GAAP). of the AMERICAN INSTITUTE OF
  CERTIFIED PUBLIC
  Audit Sampling ACCOUNTANTS (AICPA).
Audit Documentation
Application of an AUDIT  
The written record of the basis procedure to less than 100% of Auditor
for the AUDITOR's conclusions the items within an account
 Person who AUDITS financial reasonable basis for his or her  
accounts and records kept by opinion. Average-Cost Method
others. Includes both public
accounting firms registered with   A way of arriving at the cost of
the PCAOB and associated Authorized Shares inventory that computes the
persons thereof. average cost of all goods
Maximum number of shares of available for sale during a fixed
  any class a company may legally period in order to determine the
Auditors' Report create under the terms of its value of inventory.
articles of incorporation.
Written communication issued B
by an independent CERTIFIED  
PUBLIC ACCOUNTANT (CPA) Average Days’ Inventory On-Hand Backup Withholding
describing the character of his
or her work and the degree of The average number of days Payors of interest, dividends and
responsibility taken. An required to sell the current other reportable payments must
auditors' report includes a inventory of products available withhold income tax equal at a
statement that the AUDIT was for sale. It is found by dividing rate equal to the fourth lowest
conducted in accordance with the number of days in a year by rate applicable to single filers if
GENERALLY ACCEPTED inventory turnover. they fail to supply a federal id #
AUDITING STANDARDS (GAAS), or if they fail to certify that they
which require that the AUDITOR   are not subject to it.
plan and perform the audit to Average Days’ Sales Uncollected
obtain reasonable assurance Bad Debt
about whether the FINANCIAL A ratio that shows the average
STATEMENTS are free of length of time it takes a All or portion of an ACCOUNT,
material misstatement, as well company to receive payment for loan, or note receivable
as a statement that the auditor credit sales. considered to be uncollectible.
believes the audit provides a
  A periodic statement, usually The quantity of merchandise ava
Balance monthly, that a bank sends to ilable for sale at the beginning of
the holder of a an ACCOUNTING period.
Basic FINANCIAL STATEMENT, checking account showing
usually accompanied by the balance in the account at the  
appropriate DISCLOSURES that beginning of the month, during, Bequest
describe the basis of and at the end of the month.
ACCOUNTING used in its Legal process, governed by
preparation and presentation of   federal statute, whereby the
a specified date the entity's Bankruptcy DEBTS of an insolvent person
ASSETS, LIABILITIES and the are liquidated after being
EQUITY of its owners. Also Legal process, governed by satisfied to the greatest extent
known as a STATEMENT OF federal statute, whereby the possible by the DEBTOR'S
FINANCIAL CONDITION. DEBTS of an insolvent person ASSETS. During bankruptcy, the
are liquidated after being debtor's assets are held and
  satisfied to the greatest extent managed by a court
Bank Reconciliation possible by the DEBTOR'S appointed TRUSTEE.
ASSETS. During bankruptcy, the
A process by which debtor's assets are held and  
an accountant determines managed by a court Beta Coefficient 
whether and why there is a appointed TRUSTEE.
difference between Measure of a stock’s
the balance shown on the bank   relative volatility. The beta is the
statement and the balance of Base Market Value covariance of a stock in relation
the cash account in the to the rest of the stock market.
firm’s GENERAL LEDGER. Average market price of a group
of securities at a given time.  
  Bid and Asked
Bank Statement  
Beginning Inventory
 Bid is the highest price a One type of long-  
prospective buyer is prepared to term PROMISSORY NOTE, Book Value 
pay at a particular time for a frequently issued to the public
trading unit of a given as a SECURITY regulated under Amount, net or CONTRA
SECURITY; asked is the lowest federal securities laws or state ACCOUNT balances, that
price acceptable to a prospective BLUE SKY LAWS. Bonds can an ASSET or LIABILITY shows
seller of the same security. The either be registered in the on the BALANCE SHEET of
difference between the prices is owner's name or are issued as acompany. Also known
the SPREAD. bearer instruments. as CARRYING VALUE.

    Bookkeeping
Blue Sky Laws  Bond Discount
The process of recording
State laws that regulate the The amount below PAR financial transactions and
ISSUANCE of SECURITIES. These VALUE that a BOND sells for. keeping financial records.
laws are coordinated with
federal acts.    
Bond Indenture  Boot
 
Board of Directors  An additional agreement to The non technical term used by
a BOND issue that defines the some to describe any cash or
Individuals responsible for rights, privileges, and limitations other property that is received
overseeing the affairs of an of BONDHOLDERS. in exchange of property that
entity, including the election of would be otherwise nontaxable.
its officers. The board of a  
CORPORATION that issues stock Bondholder   
is elected by stockholders. Bottom Line 
A person who owns
  a BOND certificate issued by a
Bond government or CORPORATION.
 The line in a Standard rate multiplied by a operate, within prescribed or
FINANCIAL STATEMENT that level of activity to determine otherwise established
shows NET INCOME or LOSS. the OVERHEAD cost of that limitations, under substantial
activity. Activity measures control by its own management.
  include LABOR or machine
Break-Even Point  hours.  
Buyout
The point at which  
TOTAL REVENUES equals Business Combinations Purchase of at least a controlling
TOTAL COSTS. percentage of a company’s stock
Combining of two entities. to take over its ASSETS and
  Under the PURCHASE METHOD operations.
Break-Even Units  OF ACCOUNTING, one entity is
deemed to acquire another and  
The number of units of a there is a new basis of Bylaws 
product that must be sold before accounting for the ASSETS and
a company makes enough LIABILITIES of the Collection of formal, written
money to pay for direct and acquired company. In a rules governing the conduct of
indirect costs of making the POOLING OF INTERESTS, two a CORPORATION'S affairs (such
product. entities merge through an as what officers it will have,
exchange of COMMON what their responsibilities are,
  STOCK and there is no change in and how they are to be
Budget the CARRYING VALUE of the chosen). Bylaws are approved
assets or liabilities. by a corporation's stockholders,
Financial plan that serves as an if a stock corporation, or other
estimate of future   owners, if a non-stock
cost, REVENUES or both. Business Segment corporation.

  Any division of C
Burden Rate an organization authorized to
  Redeemable by the issuer before asset which is not taxed as
Cafeteria Plan the scheduled maturity. ORDINARY INCOME. Capital
gains have historically been
A benefit plan maintained by an   taxed at a lower rate than
employer for the benefit of the Callable Instrument ordinary income.
employees under which each
participant has the opportunity BOND which accords an issuer  
to select the benefits they desire. the right to redemption before it Capital Projects Funds 
Certain minimum choices and is due.
nondiscriminatory rules apply. Funds used by a not-for-
  profit organization to account fo
  Capital Asset Pricing Model (CAPM) r all resources used for the
Call Loan development of a land
Sophisticated model of the improvement or building
Loan repayable on demand. Also relationship between expected addition or renovation.
known as DEMAND LOAN. risk and expected return.
 
    Capital Stock 
Call Price Capital Expenditure
Ownership shares of
A specified price, usually above Outlay of money to acquire or a CORPORATION authorized by
face value, at which a improve capital assets such as its ARTICLES
CORPORATION may, at its buildings and machinery. OF INCORPORATION. The
option, buy back and retire money valueassigned to a
BONDS before maturity.   corporation's issued shares.
Capital Gain The BALANCE SHEET account w
  ith the aggregate amount of
Callable Portion of the total GAIN the PAR VALUE or STATED
recognized on the sale or VALUE of all stock issued by a
exchange of a noninventory corporation.
  included as part of  
Capitalize the HISTORICAL COST of Carryovers 
acquiring the asset.
Convert a schedule Provision of tax law that allows
of INCOME into   current losses or certain tax
a principal amount, called Capitalized Lease  credits to be utilized in the tax
capitalized value, by dividing by returns of future periods..
a rate of INTEREST. LEASE recorded as
an ASSET acquisition accompani  
  ed by a Cash
Capitalized Cost  corresponding LIABILITY by
the LESSEE. ASSET account on
Expenditure identified with a balance sheet representing
goods or services acquired and   paper currency and
measured by the amount CAPM  coins, negotiable money orders
of cash paid or the market and checks, bank balances, and
value of other Sophisticated model of the certain short-term government
property, CAPITAL STOCK, or relationship between securities.
services surrendered. expected risk and
Expenditures that are written off expected return.  
during two or Cash Account 
more accounting periods.  
Carrying Value  Brokerage firm account whose
  transactions are settled on
Capitalized Interest  Amount, net or CONTRA a cash basis.
ACCOUNT balances, that
INTEREST cost incurred during an ASSET or LIABILITY shows  
the time necessary to bring on the BALANCE SHEET of a Cash Basis 
an ASSET to the condition and company. Also known as BOOK
location for its intended use and VALUE.
 Method of bookkeeping by    
which REVENUES and Cash Flow to Sales  Cash Receipts Journal 
EXPENDITURES are recorded
when they are received and A way of measuring the ability of A multicolumn journal used to
paid. sales to generate record business transactions
operating CASH FLOWS. involving the receipt
  of CASH from other individuals
Cash Dividend    or businesses.
Cash Flows 
Distribution of a  
CORPORATION’s earnings to Net of cash receipts and cash Casualty Loss 
stockholders in the form disbursements relating to a
of CASH. particular activity during a Any loss of an asset due to fire
specified accounting period. storm act of nature causing asset
  damage from unexpected or
Cash Equivalents  accidental force. Generally it is
Cash Payments Journal  deductible regardless of
Short-term (generally less than whether it is business or
three months), highly liquid A multicolumn journal used to personal.
INVESTMENTS that are record sums of cash paid out for
convertible to known amounts expenses.  
of cash. CD
 
  Cash Ratio  Formal instrument issued by a
Cash Flow to Assets  bank upon the deposit of funds
Ratio which may not be withdrawn for
Used to measure the ability of of CASH and MARKETABLE a specified time period.
ASSETS to generate SECURITIES to CURRENT Typically, an early withdrawal
operating CASH FLOWS. LIABILITIES. will incur a penalty.
  include education, experience, ACCOUNTANT who has satisfied
CEO ethics and an exam. CFPs are not the education, experience, and
regulated by a governmental examination requirements of his
Officer of a firm principally authority. or her jurisdiction necessary to
responsible for the activities of be certified as a public
a COMPANY.   accountant.
Certified Internal Auditor (CIA) 
   
Certificate of Deposit (CD)  Internal AUDITOR who has CFO
satisfied the examination
Formal instrument issued by a requirements of the Institute of Executive officer who is
bank upon the deposit of funds Internal Auditors. responsible for handling funds,
which may not be withdrawn for signing CHECKS, keeping
a specified time period.   financial records, and financial
Typically, an early withdrawal Certified Management Accountant planning for a CORPORATION.
will incur a penalty. (CMA) 
 
  An accreditation conferred by CFP
Certified Financial Planner (CFP)  the Institute
of Management Accountants Individual who is trained to
Individual who is trained to that indicates the designee has develop and implement financial
develop and implement financial passed an examination and plans for individuals, businesses,
plans for individuals, businesses, attained certain levels of and organizations, utilizing
and organizations, utilizing education and experience in the knowledge of income and estate
knowledge of income and estate practice of accounting in the tax, investments, risk
tax, investments, risk private sector. management analysis and
management analysis and retirement planning. CFPs are
retirement planning. CFPs are   certified after completing a
certified after completing a Certified Public Accountant (CPA)  series of requirements that
series of requirements that include education, experience,
 ethics and an exam. CFPs are not A refund is not automatically  
regulated by a governmental mailed if one is due. A taxpayer, Closed-End Mutual Fund
authority. whether business or individual,
must file a request on a form. It MUTUAL FUND with a fixed
  must also be filed within the number of shares
Chief Executive Officer (CEO)  timeframe allotted or the refund outstanding that may be bought
may be lost. An individual can or sold. CMO - See
Officer of a firm principally claim a refund back to whatever COLLATERALIZED MORTGAGE 
responsible for the activities of year it was due but it will only OBLIGATION.
a COMPANY. be paid three years back or less.
 
    Closing Entry 
Chief Financial Officer (CFO)  Clean Opinion 
A journal entry made at the end
Executive officer who is AUDIT opinion not qualified for of an accounting period in order
responsible for handling funds, any material scope restrictions to prepare for the next
signing CHECKS, keeping nor departures accounting period by clearing
financial records, and financial from GENERALLY ACCEPTED the BALANCES of temporary
planning for a CORPORATION. ACCOUNTING PRINCIPLES accounts and summarizing the
(GAAP). Also known period’s REVENUES and
  as UNQUALIFIED OPINION. expenses.
CIA 
   
Internal AUDITOR who has Close  CMA
satisfied the examination
requirements of the Institute of To clear the BALANCES of An accreditation conferred by
Internal Auditors. temporary accounts in order to the Institute
be ready for the of Management Accountants
  next accounting period. that indicates the designee has
Claim for Refund  passed an examination and
 attained certain levels of ASSET provided to public accountant to an
education and experience in the a CREDITOR as security for underwriter when the
practice of accounting in the a loan. underwriter has a DUE
private sector. DILIGENCE responsibility under
  Section 11 of the Securities Act
  Collateralized Mortgage Obligation of 1933 regarding financial
CMO (CMO)  information included in an
offering statement.
SECURITY whose cash SECURITY whose cash
flows equal the difference flows equal the difference  
between the cash flows of the between the cash flows of the Commercial Paper 
collateralizing ASSETS and the collateralizing ASSETS and the
collateralized obligations of a collateralized obligations of a A way of borrowing money by
securitized TRUST. securitized TRUST. using unsecured short-
Characteristics of CMO residuals Characteristics of CMO residuals term loans sold directly to the
vary greatly and can be vary greatly and can be public, usually through
extremely complex in nature. extremely complex in nature. professionally managed
investments firms.
   
Co-Mingling  Combined Financial Statement   
Commission 
Mixing ASSETS, e.g. customer- FINANCIAL STATEMENT compri
owned SECURITIES, with those sing the accounts of two or more Percentage of the selling price of
owned by a firm in its entities. the property, paid by the seller.
proprietary accounts.
   
  Comfort Letter  Committee of Sponsoring
Collateral  Organizations of the Treadway
Letter provided by a company's Commission (COSO) 
independent
 An alliance of five professional    
organizations dedicated to Company Level Controls  Compilation 
disseminating
appropriate internal Controls that exist at Presentation of
control standards. the company level that have an financial statement data without
impact on controls at the the ACCOUNTANT'S assurance
  process, transaction, or as to conformity with
Commodities  application level. GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
Bulk goods such as grains,   (GAAP).
metals, and foods traded on Comparative Financial Statement 
a commodities exchange or on  
the SPOT MARKET. FINANCIAL STATEMENT presen Compilation Engagement 
tation in which the current
  amounts and the corresponding Agreement between
Common Stock  amounts for previous periods or a CPA firm and its client
dates also are shown. to issue a
CAPITAL STOCK having no COMPILATION REPORT.
preferences generally in terms  
of dividends, voting rights Compensate   
or distributions. Compilation Report 
To pay or make payment for
  something. See ACCOUNTANTS' REPORT.
Company 
   
Organization engaged in Compensatory Balance Complex Trust 
business as
a PROPRIETORSHIP, PARTNERS Funds that a borrower must A trust that is to be
HIP, CORPORATION, or other keep on deposit as required by a distinguished from a simple
form of enterprise. bank. trust in the fact that it
 permits accumulation or all changes in equity except show possible losses but wait
distribution of current those resulting from for actual profits. Concept which
income during the tax year and INVESTMENTS by owners directs the least favorable effect
provides for charitable and distributions to owners. on net income.
contributions.
   
  Condensed Financial Statement  Consistency 
Compliance Audit 
A ACCOUNTING postulate which
Review of financial records to FINANCIAL STATEMENT for ext stipulates that, except as
determine whether the entity is ernal reporting that presents otherwise noted in the
complying with specific only the major categories of FINANCIAL STATEMENT, the
procedures or rules. information. same accounting policies and
procedures have been followed
    from period to period by
Compound Interest Principles  Confirmation  an organization in the
preparation and presentation of
Interest computed AUDITOR'S receipt of a written its financial statements.
on principal plus interest earned or oral response from an
in previous periods. independent third party  
verifying the accuracy of Consolidated Financial Statements 
  information requested.
Comprehensive Income  Combined FINANCIAL
  STATEMENTS of a parent
Change in EQUITY of a business Conservatism  company and one or more of its
enterprise during a period from subsidiaries as one economic
transactions and other events An investment strategy aimed at unit
and circumstances from sources long-term capital appreciation w
not shown in the income ith low risk; moderate; cautious; Consolidation 
statement. The period includes opposite of aggressive behavior;
 BUSINESS COMBINATION of two An event that might happen but have
or more entities that occurs that is not likely or planned. separate CPE requirements.
when the entities transfer all of
their NET ASSETS to a new    
entity created for that purpose. Contingent Liability  Contra Account 

  Potential LIABILITY arising from ACCOUNT considered to be an

Constructive Receipt  a past transaction or offset to another account.
a subsequent event. Generally established to reduce
A taxpayer is considered to have the other account to amounts
received the income even   that can be realized or collected.
though the monies are not in Continuing Operations 
hand, it may have been set aside  
or otherwise made available. An Portion of a business entity Contra-Liability Account 
example is interest on a expected to remain active.
bank account. A deduction from a LIABILITY,
  such as discounts on notes
  Continuing Professional Education payable, which is a deduction
Consumer Goods  (CPE)  from the balance of notes
payable.
Goods bought for personal or Educational programs for
household use, as distinguished CERTIFIED PUBLIC  
from capital goods or producer’s ACCOUNTANTS (CPAs) to keep Contract 
goods, which are used to informed on changes that occur
produce other goods. within the profession. State In general, agreement by which
Boards for Public Accountancy rights or acts are exchanged for
  and the AMERICAN INSTITUTE lawful consideration.
Contingency  OF CERTIFIED PUBLIC
ACCOUNTANTS (AICPA) each  
Contributed Capital 
 The stockholders’ investment in   An exclusive right granted by
a CORPORATION. Controls Tests  the federal government to the
possessor to publish and sell
  Tests directed toward the design literary, musical, or other
Contribution Margin  or operation of an internal artistic materials for a period of
control structure policy or the author’s life plus 50 years,
The excess of REVENUES over procedure to assess its including computer programs.
all variable costs related to a effectiveness in preventing or
particular sales volume. detecting material misstatement  
s in a financial report. Corporate Bond 
 
Control Deficiency    DEBT instrument issued by a
Conversion  private CORPORATION, as
This exists when the design or distinct from one issued by a
operation of a control does not Exchange of a government agency or a
allow management or convertible security such as municipality.
employees, in the normal course a BOND into another security
of performing their assigned such as a fixed number of shares  
functions, to prevent or detect of the issuing Corporate Income Tax 
misstatements on a timely basis. CORPORATION’s COMMON
STOCK. The TAX that an incorporated
  business must pay to the federal
Control Risk    government and, often, to state
Convertible Stock  and city governments as well.
Measure of risk that errors
exceeding a tolerable amount Stock that may be exchanged for  
will not be prevented or other SECURITIES of the issuer. Corporation 
detected by an entity's internal
controls.   Form of doing business pursuant
Copyright  to a charter granted by a state or
 federal government.   In tax,
Corporations typically are Cost Basis  the ACCOUNTING METHOD used
characterized by the issuance of to depreciate ASSETS.
freely transferable CAPITAL Original price of an ASSET, used
STOCK, perpetual life, in determining CAPITAL GAIN.  
centralized MANAGEMENT, and Coupon 
limitation of  
owners' LIABILITY to the Cost of Capital  INTEREST rate on a DEBT
amount they INVEST in the SECURITY the ISSUER promises
business. Rate of return that a business to pay to the holder
could earn if it chose until maturity, expressed as an
  another investment with annual percentage of FACE
COSO  equivalent risk. VALUE.

An alliance of five professional    

organizations dedicated to Cost of Goods Sold Coupon Bond 
disseminating
appropriate internal Figure representing the cost of A BOND that is usually not
control standards. buying raw materials and registered with the
producing finished goods. issuing CORPORATION but
  instead bears interest coupons
Cost Accounting    stating the amount of INTEREST
Cost Recovery Method  due and the payment date.
Procedures used for rationally
classifying, recording, and METHOD OF REVENUE  
allocating current or predicted RECOGNITION which recognizes Coverdell Education Savings
costs that relate to a certain profits after costs are Account (Education IRA) 
product or production process. completely recovered. Generally
used only when the total amount A tax exempt trust exclusively
of collections is highly uncertain. for the purpose of paying
 qualified higher education costs   Party that loans money or other
of the trusts designated Credit  ASSETS to another party.
beneficiary.
Entry on the right side of  
  a DOUBLE-ENTRY Current Asset 
CPA BOOKKEEPING system that
represents the reduction of ASSET that one can reasonably
ACCOUNTANT who has satisfied an ASSETor expense or the expect to convert into cash, sell,
the education, experience, and addition to a LIABILITY or or consume in operations within
examination requirements of his RVENUE. a single operating cycle, or
or her jurisdiction necessary to within a year if more than one
be certified as a public   cycle is completed each year.
accountant. Credit Agreement 
 
  Arrangement in which one party Current Liability 
CPE borrows or takes possession in
the present by promising to pay Obligation
Educational programs for in the future. whose LIQUIDATION is expected
CERTIFIED PUBLIC to require the use of existing
ACCOUNTANTS (CPAs) to keep   resources classified as CURRENT
informed on changes that occur Credit Balance  ASSETS, or the creation of other
within the profession. State current liabilities.
Boards for Public Accountancy BALANCE remaining after one of
and the AMERICAN INSTITUTE a series of bookkeeping entries.  
OF CERTIFIED PUBLIC This amount represents Current Ratio 
ACCOUNTANTS (AICPA) each a LIABILITY or incometo the
have entity. Used as an indicator of a
separate CPE requirements. COMPANY’s liquidity and ability
  to pay short-term debts. This is
Creditor  found by dividing CURRENT
 ASSETS by CURRENT Last day the AUDITORS perform by reason of the death of the
LIABILITIES. fieldwork and the last day of insured. (Although most death
responsibility relating to benefits are paid at termination
  significant events subsequent to of life, certain plans now pay
the financial statement date. accelerated death benefits while
Current Value the insured is still alive, i.e.: an
  AIDS patient might possibly
1) Value of an ASSET at the DDB  receive accelerated death
present time as compared with benefit)
the asset's HISTORICAL COST. Method of ACCELERATED
(2) In finance, the amount DEPRECIATION, approved by  
determined by discounting the the INTERNAL REVENUE Debenture 
future revenue stream of an SERVICE (IRS), permitting twice
asset using COMPOUND the rate of annual General DEBT obligation backed
INTEREST PRINCIPLES. DEPRECIATION as only by the integrity of the
the STRAIGHT-LINE borrower and documented by an
  DEPRECIATION method. agreement called and
Current Yield  INDENTURE.
 
Annual INTEREST on Dealer   
a BOND divided by the market Debenture Stock 
price. Individual or firm acting as a
principal in a Stock issued under
D securities transaction. a contract providing for fixed
payments at scheduled intervals
    and more like preferred stock
Date of Auditors'/Accountants' Death Benefit  than a DEBENTURE, since their
Report  status
Amounts received under a in liquidation is EQUITY and
life insurance contract and paid not DEBT.
  Written promise to repay  
Debit  a DEBT. Debtor 

Entry on the left side of   Party owing money or other

a DOUBLE-ENTRY Debt Retirement  ASSETS to a CREDITOR.
BOOKKEEPING system that
represents the addition of Repayment of DEBT.  
an ASSET or expense or the Decedent 
reduction to a LIABILITY or  
REVENUE. Debt Security  Individual who has died.

  Document which is evidence of  

Debit Balance  an obligation or LIABILITY. Declare 

BALANCE remaining after one or   Authorize the payment of

a series of bookkeeping entries. Debt Service Fund  DIVIDEND on a specified date,
This amount represents an act of the BOARD OF
an ASSET or an expense of the Fund DIRECTORS of a CORPORATION.
entity. whose PRINCIPAL or INTEREST 
is set aside and accumulated  
  to retire DEBT. Declining-Balance Method 
Debt 
  An accelerated method of
General name for money, notes, Debt-to-Equity Ratio  depreciating a tangible long-
BONDS, goods or services which lived ASSET by applying a fixed-
represent amounts owed. A way of measuring the rate based on some multiple of
relationship of DEBT financing the STRAIGHT-LINE
  to EQUITY FINANCING, or the DEPRECIATION rate to
Debt Instrument  extent to which a companyis its CARRYING VALUE.
leveraged.
     
Defalcation Deferred Charge  Deficiency in Design

To misuse or embezzle funds. Income received but not earned This exists when a control
until all events have occurred. necessary to meet the control
  Deferred income is reflected as objective is missing or an
Default  a LIABILITY. existing control is not properly
designed so that even if the
Failure to meet any financial   control operates as designed, the
obligation. Default triggers Deferred Income Taxes  control objective is not always
a CREDITOR'S rights and met.
remedies identified in the ASSETS or LIABILITIES that
agreement and under the law. arise from timing or  
measurement differences Deficiency in Operation 
  between tax and accounting prin
Defeasance  ciples. This exists when a properly
designed control does not
Annulment of a contract or   operate as designed, or when
deed; a clause within a contract Deferred Interest Bond  the person performing the
or deed that provides for control does not possess the
annulment. BOND that pays INTEREST at a necessary authority or
later date. qualifications to perform the
  control effectively.
Deferral 
Deferred Payment Annuity   
The postponement of the date Deficit 
that an expense already paid or ANNUITY whose contract provid
incurred, or of a REVENUE es that payments to the Financial shortage that occurs
already received, is entered in annuitant be postponed until a when LIABILITIES exceed
the LEDGER. number of periods have elapsed. ASSETS.
  individual forms as the Financial instruments
Defined Benefit Plan  limitations and computation whose value varies with the
may change each tax year. value of an
See EMPLOYEE BENEFIT PLAN. underlying asset (such as a
  stock, BOND, commodity or
  Depletion  currency) or index such as
Defined Contribution Plan  interest rates. Financial
Method of computing a instruments whose
See EMPLOYEE BENEFIT PLAN. deduction to ACCOUNT for a characteristics and value depend
reduction in value of extractable on the characterization of an
  natural resources. underlying instrument or asset.
Deflation 
   
Decline in the prices of goods Deposit Method  Detailed Income Statement 
and services.
Expense allowance made for A complete and
  wear and tear on an ASSET over explicit statement of an
Demand Loan  its estimated useful life. economic entity’s financial
activities and holdings.
Loan repayable on demand. Also  
known as a CALL LOAN. Depreciation   
Detection Risk 
  Expense allowance made for
Dependent Care Expenses  wear and tear on an ASSET over Risk that the AUDITOR will not
its estimated useful life. detect a material misstatement.
Qualified child care expenses
will allow a taxpayer this    
computed credit against tax. The Derivatives  Detective Controls  
amounts can be found on the
 These have the objective of a BURDEN RATE or OVERHEAD  
detecting errors or fraud that APPLICATION RATE. Discontinued Operations 
have already occurred that could
result in a misstatement of   Portion of a business that is
the financial statements. Disbursement planned to be or is discontinued.

  Payment by cash or check.  

Direct Labor Costs  Discount 
 
The labor cost is for specific Disclaimer of Opinion  Reduction from the full amount
work that can be easily and of a price or DEBT.
economically traced to an end Statement by
product. an AUDITOR indicating inability  
to express an opinion on the Discount Bond 
  fairness of the FINANCIAL
Direct Material  STATEMENTS provided and the BOND selling below
reason for the inability. The its REDEMPTION VALUE.
A material that will become part auditor is required to disclaim
of a finished product and can be depending on the limitation in  
easily and economically traced scope. Discount Rate 
to specific product units.
  Rate at which INTEREST is
  Disclosure  deducted in advance of the
Direct Overhead  issuance, purchasing, selling, or
Process of lending of a financial
Portion of OVERHEAD costs divulging accounting informatio instrument. Also, the rate used
allocated to manufacturing, by n so that the content to determine the CURRENT
the application of of FINANCIAL STATEMENTS is VALUE, or present value, of
a standard factor termed understood. an ASSET or incomestream.
  noncommercial government fees  
Discount Yield  have been paid. Dividends

Yield on a SECURITY sold at   Distribution of earnings to

a DISCOUNT. Dissolution  owners of
a CORPORATION in CASH, other
  Termination of ASSETS of the corporation, or
Discounted Cash Flow  a CORPORATION. the corporation's CAPITAL
STOCK.
Present value of  
future cash estimated to be Distribution Expense   
generated. Dividends in Arrears 
Expense of selling, advertising,
  and delivery of goods and DIVIDENDS on
Discretionary Trust  services. cumulative PREFERRED
STOCK that remain unpaid in the
Arrangement in which   year they are due.
the TRUSTEE has the authority Distributions 
to make INVESTMENT decisions  
and has control over Payment by a business entity to Dividends Payable 
investments within the its owners of items such
framework of as cash ASSETS, stocks, or A LIABILITY for payment of a
the TRUST instrument. earnings. COMPANY’s earnings to its
shareholders.
   
Disposable Income  Dividend Payout Ratio   
Dividends Yield 
Personal INCOME remaining Percentage of earnings paid to
after personal taxes and shareholders in CASH.
 Used to measure the SERVICE (IRS), permitting twice Dating of the ACCCOUNTANTS'
current return to an investor in the rate of annual or AUDITORS' REPORT when
a stock. DEPRECIATION as a subsequent event disclosed in
the STRAIGHT-LINE the FINANCIAL
  DEPRECIATION method. STATEMENTS occurs after
Documentation Completion Date  completion of the field work but
  before issuance of the report.
A complete and final set of audit Double-Entry Bookkeeping  For example, "January 3, 19xx,
documentation should be except for Note x, as to which
assembled for retention as of a Method of recording financial the date is March 10, 19xx."
date not more than 45 days after transactions in which each
the report release date. transaction is entered in two or  
more accounts and involves Due Date 
  two-way, self-balancing posting.
Double Taxation  Total DEBITS must equal total Each governing agency and its
CREDITS. forms scheduled reporting and
The act of taxing corporate most importantly payments
earnings twice, once as the NET   have a required due date. It is
INCOME of Draft this date that if most files timely
the CORPORATION and once as may result in a penalty, fine, and
the DIVIDENDS distributed to Signed, written order by which commence interest charges.
stockholders. one party (drawer) instructs
another party (drawee) to pay a  
  specified sum to a third party Due Diligence 
Double-Declining-Balance (payee).
Depreciation Method (DDB)  (1) Procedures performed by
  underwriters in connection with
Method of ACCELERATED Dual Dating  the issuance of a SECURITIES
DEPRECIATION, approved by EXCHANGE COMMISSION (SEC)
the INTERNAL REVENUE registration statement. These
 procedures involve questions received as compensation for  
concerning the company and its services rendered. Econometrics 
business, products, competitive
position, recent financial and   Use of computer analysis
other developments and Earned Income Tax Credit (EITC)  and modeling techniques to
prospects. Also performed by describe in mathematical terms
others in connection with A refundable tax credit for the relationship between key
acquisitions and other eligible low income workers, economic forces such as labor,
transactions. (2) Requirement subject to computations based capital, interest rates, and
found in ethical codes that the on qualifying children and phase government policies, the test the
person governed by the ethical in and phase out income levels. effects of changes in economic
rules exercise professional care scenarios.
in conducting his or her  
activities. Earnings Per Share (EPS)   
Economic Growth Rate 
  Measure of performance
Dutch Auction  calculated by dividing Rate of change in the gross
the net earnings of national product, as expressed
Auction system in which the a company by the average in an annual percentage.
price of an item is gradually number of shares
lowered until it meets a outstanding during a period.  
responsive bid and is sold. Economics 
 
E Earnings Price Ratio  The study of the ways goods and
services are produced,
  Relationship of EARNINGS PER transported, sold, and used.
Earned Income  SHARE (EPS) to current stock
price.  
Wages, salaries, professional Effective Interest Method 
fees, and other amounts
 A way of AMORTIZING BOND   or wages. Some plans such as
DISCOUNTS or PREMIUMS by EITF group term life insurance,
applying a constant interest medical insurance and qualified
rate to the CARRYING VALUE of Assists the FINANCIAL retirement plans are treated
the BONDS at the beginning of ACCOUNTING STANDARDS favorably under the tax law.
each interest period. BOARD (FASB) and provides Most common qualified
guidance on early identification retirement plans are: (1) defined
  of emerging issues affecting benefit plans - a promise to pay
Effective Interest Rate  financial reporting and participants specified benefits
problems in implementing that are determinable and based
The rate of INTEREST actually authoritative pronouncements. on such factors as age, years of
paid or earned. service, and compensation; or
  (2) defined contribution plans -
  Emerging Issues Task Force (EITF)  provide an
Effective Tax Rate  individual account for each
Assists the FINANCIAL participant and benefits based
Total income taxes expressed as ACCOUNTING STANDARDS on items such as amounts
a percentage of NET BOARD (FASB) and provides contributed to the account by
INCOME before taxes. guidance on early identification the employer and employee
of emerging issues affecting and investment experience. This
financial reporting and type includes PROFIT-SHARING
 
problems in implementing PLANS, EMPLOYEE STOCK
EITC 
authoritative pronouncements. OWNERSHIP PLANS and 401(k)
PLANS.
A refundable tax credit for
eligible low income workers,  
Employee Benefit Plan    
subject to computations based
Employee Stock Ownership Plan
on qualifying children and phase
Compensation arrangement, (ESOP) 
in and phase out income levels.
generally in writing, used by
employers in addition to salary
 Stock bonus plan of an employer    
that acquires SECURITIES issued Engagement Completion Document  Equilibrium Price 
by the plan sponsor.
A document whereby Price when the supply of goods
  the AUDITOR identifies in a particular market matches
Encumbrance  all significant findings or issues. demand.
The document should be as
(1) MORTGAGE or other lien on specific as necessary in the  
the entity's ASSETS; (2) circumstances for a reviewer Equity 
Anticipated EXPENDITURE; (3) to gain a thorough
Uncompleted or undelivered understanding of the significant Residual INTEREST in the
portion of a purchase findings or issues. ASSETS of an entity that remains
commitment. after deducting its LIABILITIES.
  Also, the amount of a business'
  Entrepreneur  total assets less total liabilities.
Ending Inventory  Also, the third section of
Person who takes on the risks of a BALANCE SHEET, the other
Merchandise on hand at the end starting a new business. two being assets and liabilities.
of an accounting period
   
  EPS  Equity Account 
Endorsement 
Measure of performance ACCOUNT in the EQUITY section
The process by which the payee calculated by dividing of the BALANCE SHEET.
transfers ownership of a CHECK the net earnings of Includes CAPITAL STOCK,
to a bank or another party by a company by the average ADDITIONAL PAID IN
writing his or her name on the number of shares CAPITAL and RETAINED
back of it. outstanding during a period. EARNINGS.
    the decedent's ASSETS less
Equity Financing  Error  LIABILITIES and certain
expenses which may include
Raising the money by issuing Act that departs from what funeral and administrative
shares of COMMON should be done; imprudent expenses.
STOCK or PREFERRED STOCK. deviation, unintentional mistake
or omission.  
Equity Method of Accounting  Estimated Tax 
 
Investors cost basis is adjusted Escrow Amount of tax LIABILITY a
up or down (in proportion to the taxpayer may expect to pay for
% of stock ownership) as the Money or property put into the the current tax period. Usually
investee's retained custody of a third party for paid through quarterly
earnings fluctuation; used for delivery to a GRANTEE, only installments.
long-term investments in equity after fulfillment of specified
securities of affiliate where conditions.  
holder can exert significant Estimation Transactions 
influence; 20% ownership or  
greater is arbitrarily presumed ESOP  Activities that
to have significant influence involve management judgments
over the investee. Stock bonus plan of an employer or assumptions in
that acquires SECURITIES issued formulating account balances in
  by the plan sponsor. the absence of a precise means
Equity Securities of measurement.
 
CAPITAL STOCK and other Estate Tax   
SECURITIES that represent Evidential Matter 
ownership shares, or the legal Tax on the value of a
rights to purchase or acquire DECENDENT'S taxable estate, Underlying ACCOUNTING data
CAPITAL STOCK. typically defined as and other corroborating
 information that support Common exclusions include an exemption unless they are
the FINANCIAL STATEMENTS. gifts, inheritances, and death claimed as a dependent on
proceeds paid under a life another individual's tax return.
  insurance contract. Also known Exemptions also are granted to
Exchanges  as excluded income. taxpayers for their dependents.

Transfer of money, property or    

services in exchange for any Executor  Expatriation Tax 
combination of these items.
Person appointed by a will to Individuals that loose or
  manage a DECENDENT'S estate. terminate their residency within
Excise Tax the 10 year period immediately
  preceding the close of a tax year,
Tax or duty on Exempt Organization  if the termination or loss is for
the manufacture, sale, or the sole purpose of avoiding tax.
consumption of commodities. Organization which is generally
exempt from paying  
  federal income tax. Exempt Expectation Gap 
Excluded Income  organizations include religious
organizations, charitable The difference in perception
See EXCLUSIONS. organizations, social clubs, and between the public and
others. the CPA as a result
  of accounting and audit service.
Exclusions    
Exemption   
Income item which is excluded Expenditure 
from a taxpayer's gross Amount of a
income by the INTERNAL taxpayer's income that is not Payment, either in CASH, by
REVENUE CODE or an subject to tax. All individuals, assuming a LIABILITY, or by
administrative action. TRUSTS, and estates qualify for surrendering ASSET.
  An AUDITOR that has a REVENUE SERVICE (IRS), a state
Expense  reasonable understanding or city, which allows the
of audit activities and has taxpayer to file tax returns later
Something spent on a specific studied the company's industry than the original due date.
item or for a particular purpose. as well as the accounting and
auditing issues relevant to the  
  industry. Extent of Tests of Control 
Expense Ratio 
  Each year the AUDITOR must
Amount, expressed as a Exposure Draft  obtain sufficient evidence about
percentage of total investment, whether the company's internal
that shareholders pay Document issued by control over financial reporting,
for MUTUAL FUND operating the AMERICAN INSTITUTE OF including the controls for
expenses and management fees. CERTIFIED PUBLIC all internal control components,
ACCOUNTANTS is operating effectively.
  (AICPA), FINANCIAL
Experienced Auditor  ACCOUNTING STANDARDS  
BOARD External Reporting  
An AUDITOR that has a (FASB), GOVERNMENTAL
reasonable understanding ACCOUNTING STANDARDS Reporting to stockholders and
of audit activities and has BOARD (GASB)or other the public, as opposed to
studied the company's industry standards setting authorities to internal reporting
as well as the accounting and invite public comment before a for management's benefit.
auditing issues relevant to the final pronouncement is issued.
industry.  
  Extinguishment of Debt 
  Extension  
Exploration Expenditures  To get rid of the liability by
Time granted by a taxing payment; to bring to an end.
authority, such as the INTERNAL
   Circumstance where a business both having reasonable
Extraordinary Items   receives more money from a knowledge of the relevant facts.
factor than the value of the
Events and transactions RECEIVABLES, which is  
distinguished by their unusual a loan against inventory in FASB  
nature and by the infrequency of anticipation of future sales.
their occurrence.Extraordinary Independent, private, non-
items are reported separately,   governmental authority for the
less applicable income taxes, in Factory Overhead Costs  establishment
the entity's statement of income of ACCOUNTING principles in
or operations. Various production-related costs the United States.
that cannot be practically or
F conveniently traced to an end  
product. Favorable Variance
 
Face Value    Excess of actual REVENUE over
Fair Credit Reporting Act  projected revenue, or actual
Amount due at maturity from costs over projected costs.
a BOND or note. Federal law enacted in 1971
giving persons the right to see  
  their credit records at credit Federal Income Taxes 
Factoring  reporting bureaus.
Taxes on NET INCOME that must
Selling a RECEIVABLE at a   be paid to the federal
discounted value to a third party Fair Market Value  government by individuals and
for cash. businesses.
Price at which property would
  change hands between a buyer  
Factoring: Over-Advances  and a seller without any Federal Reserve Bank 
compulsion to buy or sell, and
 One of the 12 banks that, with   Official promulgations, known as
their branches, make up FIFO  STATEMENTS OF FINANCIAL
the FEDERAL RESERVE SYSTEM. ACCOUNTING STANDARDS, by
ACCOUNTING method of the FINANCIAL ACCOUNTING
  valuing INVENTORY under STANDARDS BOARD
Federal Reserve System which the costs of the first goods (FASB) which are part
acquired are the first costs of GENERALLY ACCEPTED
System established by the charged to expense. Commonly ACCOUNTING PRINCIPLES
Federal Reserve Act of 1913 to known as FIFO. (GAAP) in the United States.
regulate the U.S. monetary and
banking system.    
Filing of Returns  Financial Accounting Standards
  Board (FASB)  
Fiduciary  Taxpayers meeting statutory
requirements MUST file various Independent, private, non-
Person who is responsible for returns on the prescribed forms. governmental authority for the
the administration of property And they must be filed timely or establishment
owned by others. the y may not be considered as of ACCOUNTING principles in
Corporate management is a filed. the United States.
FIDUCIARY with respect to
corporate ASSETS which are    
beneficially owned by the Finance  Financial Institution 
stockholders and CREDITORS.
Similarly, a TRUSTEE is the The science of Organization engaged in any of
fiduciary of a TRUST and the management of money and the many aspects
partners owe fiduciary other financial ASSETS. of finance including commercial
responsibility to each other and banks, thrift institutions,
to their creditors.   investment banks, securities
Financial Accounting Standards  brokers and
dealers, credit unions,
 investment The products that have been Period of 12 consecutive months
companies, insurance companie made and are ready for sale. chosen by an entity as
s, and REAL its ACCOUNTING period which
ESTATE INVESTMENT TRUSTS.   may or may not be a calendar
Finished Goods Inventory  year. Fixed Asset - Any tangible
  ASSET with a life of more than
Financial Leverage  An inventory account unique to one year used in an entity's
manufacturing operations. operations.
The ability to increase earnings
for stockholders by earning   Fixed Annuity 
more on ASSETS than is paid Firm
in INTEREST on DEBTincurred Investment contract sold by
to finance the assets. A business partnership, an insurance company that
especially when it is guarantees fixed payments,
  unincorporated. either for life or for a specified
Financial Statements  period, to an annuitant.
 
Presentation of financial data First In, First Out (FIFO)   
including BALANCE SHEETS, Fixed Assets 
INCOME STATEMENTS and ACCOUNTING method of
STATEMENTS OFCASH FLOW, valuing INVENTORY under Tangible LONG TERM ASSETS
or any supporting statement which the costs of the first goods used in the continuing operation
that is intended to communicate acquired are the first costs of a business that are unlikely to
an entity's financial position at a charged to expense. Commonly change for a long time.
point in time and its results of known as FIFO.
operations for a period then  
ended.   Fixed Costs 
Fiscal Year 
 
Finished Goods 
 Costs that remain constant allowance for a normal profit  
within a defined range of margin. Forecast 
activity, volume, or time period.
Flotation Cost  Prospective FINANCIAL
  STATEMENTS that are an
Fixed Price  Cost of issuing new stocks or entity's expected financial
BONDS. position, results of operations,
In a public offering of new and cash flows.
SECURITIES, price at which  
investment bankers in the FOB  
underwriting syndicate agree to Forecasted Balance Sheet 
sell the issue to the public. Indicates the point at
which title to goods passes. A balance sheet that projects the
  financial position of a business
Fixture     for a future period.
FOB Destination 
Attachment to real property that  
is not intended to be moved and A shipping term that means that Forecasted Income Statement   
would create damage to the the seller bears transportation
property if it were moved. costs to the place of delivery. An INCOME STATEMENT that
projects the NET INCOME of a
    business for a future period.
Floor FOB Shipping Point 
 
Term used when discussing A shipping term that means that Forecasting of Cash Flow 
INVENTORIES. Inventory cannot the buyer bears transportation
be valued lower than the "floor" costs from the point of origin. Projecting the cash receipts and
which is the netrealizable value the cash payments for a
of the inventory less an future period.
    SEC filing which is the
Foreclosure  Foreign Exchange  quarterly report due 45 days
after each of the first three
Seizure of COLLATERAL by Instruments employed in quarter.ends of each fiscal year.
a CREDITOR when DEFAULT un making payments between
der a loan agreement occurs. countries.  
Form 8-K 
   
Foreign Corporation  Foreign Tax Credit  SEC filing which is a filing that
must be made on the occurrence
A corporation which is not A U.S. taxpayer that pays or of an event that is deemed to be
organized under the laws of accrues income tax to a foreign of significant importance
ones territories or states. Taxing country may elect to credit or to SECURITY holders.
of foreign corporations depends deduct these taxes in a
on whether the corporation has determinable us dollar amount.  
Nexus or effectively This is usually done on the Form W-4 
connected income in that state. annual individual tax return and
there is s specific form provided A form that specifies the number
  for this. of EXEMPTIONS claimed by each
Foreign Currency Translation  employee and that gives the
  employer the authority to
Restating foreign currency in Form 10-K  withhold money for an
equivalent dollars; unrealized employee’s FEDERAL INCOME
gains or losses are postponed SEC filing which is the ANNUAL TAXES and
and carried in REPORT due 90 days after the Federal Insurance Contributions
Stockholder's Equity until the registrant's BALANCE SHEET Act (FICA) taxes.
foreign operation is date.
substantially liquidated.  
  Franchise 
Form 10-Q 
 Legal arrangement whereby the The amount of cash that remains Requirement to disclose
owner of a trade name, after deducting the funds all material facts relevant to
franchisor, contracts with a a COMPANY must commit to a transaction.
party that wants to use the name continue operating at its
on a non-exclusive basis to sell planned level. Fund Accounting 
goods or services, franchisee.
Frequently, the franchise   Method of ACCOUNTING and
agreement grants strict Free On Board (FOB)  presentation whereby ASSETS
supervisory powers to the and LIABILITIES are grouped
franchisor over the franchisee Indicates the point at according to the purpose for
which, nevertheless, is an which title to goods passes. which they are to be used.
independent business. Generally used by government
  entities and not-for-profits.
  Freight In 
Franchise Tax   
Transportation charges Fundamental Analysis
State tax which is imposed on a on merchandise purchased for
state-chartered CORPORATION f resale. Research of such factors as
or the right to do business under interest rates, gross national
its corporate name.   product, inflation,
Freight Out  unemployment, and inventories
  as tools to predict the direction
Fraud  Transportation charges of the economy.
on merchandise sold;
Willful misrepresentation by an operating expense.  
one person of a fact inflicting Funding 
damage on another person.  
Full Disclosure  Refinancing a DEBT on or before
  its MATURITY; also
Free Cash Flow  
 called REFUNDING and, in by the FINANCIAL ACCOUNTING Group that has authority to
certain instances, pre-refunding. STANDARDS BOARD (FASB). establish standards of financial
reporting for all units of state
    and local government.
Future Contract  GAAS 
 
Transferable agreement to See GENERALLY General Journal 
deliver or receive during a ACCEPTED AUDITING
specific future month a STANDARDS. The simple and most flexible
standardized amount of a type of journal.
commodity.  
Gain   
  General Ledger  
Future Value  Excess of REVENUES received
over costs relating to a Collection of
The amount that specific transaction. all ASSET, LIABILITY,
an investment will be worth at a owners EQUITY, REVENUE,
future date if it is invested at   and expense accounts.
compound interest. GAO
 
G Accounting and auditing office of General Partnership 
the United States government.
  An independent agency that PARTNERSHIP with no limited
GAAP  reviews federal financial partners.
transactions and reports directly
Conventions, rules, and to Congress.  
procedures necessary to define Generally Accepted Accounting
accepted accounting practice at   Principles (GAAP) 
a particular time. The highest GASB 
level of such principles are set
 Conventions, rules, and unified estate and gift transfer  
procedures necessary to define tax. Goods Available for Sale 
accepted accounting practice at
a particular time. The highest   The sum of beginning
level of such principles are set Going Concern  inventory and the net cost
by the FINANCIAL ACCOUNTING of purchases during a period;
STANDARDS BOARD (FASB). Assumption that a business can the total goods available for
remain in operation long enough sale to customers during
  for all of its current plans to be an accounting period.
Generally Accepted Auditing carried out.
Standards (GAAS)   
  Goodwill 
Standards set by the AMERICAN Going Private  
INSTITUTE OF CERTIFIED Premium paid in
PUBLIC ACCOUNTANTS Movement from public the acquisition of an entity over
(AICPA) which concern ownership to private ownership the fair value of its identifiable
the AUDITOR'S professional of a COMPANY’s shares either by tangible and intangible ASSETS
qualities and judgment in the the company’s repurchase of less LIABILITIES assumed.
performance of his or shares or through purchases by
her AUDIT and in the actual an outside private investor.  
report. Governing Documents 
 
  Going Public Official legal documents that
Gift  dictate how an entity is
Activities that relate to offering a operated. The governing
A valid transfer of property from private company's shares to the documents of
one taxpayer to another without general investing public a CORPORATIONinclude
consideration or compensation. including registering with ARTICLES
A gift may be subject to the the SEC. OF INCORPORATION and BYLA
WS; a PARTNERSHIP includes
 the partnership agreement; a Person to whom property is The difference between NET
TRUST includes the trust transferred. SALES and COST OF GOODS
agreement or trust indenture; SOLD.
and an LLC includes the  
ARTICLES Grantor   
OF ORGANIZATIONand OPERAT Gross Sales 
ING AGREEMENT. (1) Person who transfers
property. (2) Person who The total amount of sales
  creates a trust. for cash and
Government Accountability Office on credit accumulated during a
(GAO)    specific accounting period.
Greenmail 
Accounting and auditing office of
the United States government. Any amount a corporation pays Guaranty 
An independent agency that to a shareholder to directly or
reviews federal financial indirectly buy back its stock. Legal arrangement involving a
transactions and reports directly promise by one person to
to Congress.   perform the obligations of a
Gross Income second person to a third person,
  in the event the second person
Governmental Accounting The beginning point for the fails to perform.
Standards Board (GASB)  determination of income,
including income from whatever H
Group that has authority to sources derived.
establish standards of financial  
reporting for all units of state   Half-Life 
and local government. Gross Margin 
Point in time at which half
  the PRINCIPAL has been repaid
Grantee  in a mortgage-
 backed security guaranteed or payment date and The time in which a taxpayer
issued by the Government whose cash value is not needed acquires property and the date
National Mortgage Association, until that date. on which it is sold.
the Federal National Mortgage
Association, or the Federal    
Home High-Low Method  Hope Scholarship Credit  
Loan Mortgage Corporation.
A common, simple way of A maximum allowable credit of
  separating VARIABLE $1,500 per student for each of
Head of Household COSTS from FIXED COSTS. the first 2 years of post-
secondary education. It is
An individual entitled to   allowable after all additional
special tax rates that fall midway High-Premium Convertible requirements are met.
between single rates and Debenture
married filing joint rates, if they  
fit the qualifying profile. BOND with a long-term, high- Horizontal Analysis 
premium, COMMON
  STOCK conversion feature and A technique for
Hedge  also offering a fairly competitive analyzing FINANCIAL
interest rate. STATEMENTS that involves the
A financial term for a specific computation of changes in both
type of commodities planning   dollar amounts and percentages
and trading. Historical Cost   from the previous year to the
current year.
  Original cost of an asset to an
Held-to-Maturity Security  entity. I

A DEBT    
SECURITY that management inte Holding Period  IASC 
nds to hold to its MATURITY or
 An independent private sector If no interest or an unrealistic  
body, formed in 1973, with the amount of interest is charged in Income Statement 
objective of harmonizing a salve involving certain kinds of
the accounting principles which deferred payments, then Summary of the effect
are used in businesses and other the transaction will be treated as of REVENUES and expenses over
organizations for financial if the realistic rate of interest a period of time.
reporting around the world. Its had been used. The difference
members are 143 professional between the realistic interest  
accounting bodies in 104 and the interest actually used is Income Summary  
countries. referred to as imputed interest.
A temporary account used
    during the closing process that
IMA In Arrears  holds a summary of
all REVENUES and EXPENSES
A Not paid at the time originally before the NET
professional organization made agreed to and overdue. INCOME or loss is transferred to
up primarily the capital account.
of management accountants.  
Income  
  Income Tax Basis  
Improvement Inflow of REVENUE during
a period of time. (1) For tax purposes, the
EXPENDITURE directed to a concept of basis determines the
particular ASSET to improve its   proper amount
performance or useful life. Income from Operation  of gain to report when
an ASSET is sold. Basis is
  Gross margin with operating generally the cost paid for an
Imputed Interest  expenses subtracted. asset plus the amounts paid to
improve the asset less
deductions taken against the
 asset, such an issuer of bonds and  
as DEPRECIATION and AMORTI the BONDHOLDER covering Index
ZATION. (2) certain considerations such as
For accounting purposes, a form of the BOND for example. Statistical composite that
consistent basis of accounting measures changes in the
that uses income tax accounting   economy or in financial markets,
rules while GENERALLY Independence Standard Board often expressed in percentage
ACCEPTED ACCOUNTING (ISB)  changes from a base year or
PRINCIPLES (GAAP) does not. from the previous month.
This is the private
  sector standard-setting body  
Incorporation  governing the independence of Indirect Cost 
AUDITORs from their public
Process by which company clients. It came about Any cost that cannot be
a COMPANY receives a state from discussions between conveniently and economically
charter allowing it to operate as the AICPA, traced to a specific department;
a CORPORATION. other accounting representative a manufacturing cost that is not
s and the SEC. easily traced to a specific
  product and must be assigned
Incremental Cash Flow    using an allocation method.
Independent Broker
Net of cash outflows and inflows  
attributable to a New York Stock Indirect Labor Costs
corporate investment project. Exchange member who executes
orders for other floor brokers Labor costs for production-
  who have more volume than related activities that cannot be
Indenture  they can handle, or for firms connected with or conveniently
whose exchange members are and economically traced to a
Formal agreement, also called a not on the floor. specific end product.
deed of trust, between
  make cash contributions per acquired through laws of
Indirect Manufacturing Costs  year dependent on the descent and distribution from a
individual'sadjusted gross person who dies without leaving
Various production-related costs income and participation in an a will. The value of property
that cannot be practically or employer's retirement plan. inherited id excluded from a
conveniently traced to an end Under a traditional IRA these taxpayers gross income, but if
product. earnings are not taxable until the property inherited produces
the time of withdrawal from the income it is included in gross
  plan. income. A taxpayer's basis in
Indirect Materials  inherited property is the fair
  market value at the time of
Minor materials and Inflation  death.
other production supplies that
cannot be conveniently and Rise in the prices of goods and
economically traced to specific services, as happens when Initial Public Offering (IPO) 
products. spending increases relative to
the supply of goods on When a private company goes
  the market. public for the first time.
Indirect Method 
   
The procedure for converting Inflation Rate  Inquiry 
the INCOME STATEMENT from
an ACCRUAL to a CASH BASIS. Rate of change in prices. A procedure that consists of
seeking information, both
    financial and non financial, of
Individual Retirement Account Inheritance  knowledgeable persons
(IRA)   throughout the company. It is
As distinguished from used extensively throughout
A personal savings plan that a BEQUEST or devise, the audit and often is
allows an individual to an inheritance is property complementary to performing
 other procedures. Inquiries may gain is reported as the note is  
range from formal written paid off. Insured Account 
inquiries to informal oral
inquiries. Account at a bank, savings
Institute of Management Accounts and loan association, credit unio
  (IMA)  n, or brokerage firm that
Inside Information  belongs to a federal or private
A insurance organization.
Corporate affairs that have not professional organization made
yet been made public. up primarily  
of management accountants. Intangible Asset 
 
Insolvency    Asset having no physical
Instrument  existence such as trademarks
Inability to pay DEBTS when and patents.
due. A legal document used for a
specific purpose, such as paying  
  for goods received. Interest 
Insolvent   
  Payment for the use or
When an entity's LIABILITIES Insurance  forbearance of money.
exceed its ASSETS.
System whereby individuals and  
  companies that are concerned Interest Coverage Ratio 
Installment Method  about potential hazards pay
premiums to an A way of measuring the degree
Tax ACCOUNTING method of insurance company, which of protection that
reporting GAIN on the sale of reimburses them in the event a CREDITOR has from a
an ASSET exchanged for a of loss. DEBTOR’s DEFAULT on interest
RECEIVABLE. In general, the payments.
    ACCOUNTING PRINCIPLES and
Interest Rate  Internal Control  includes those policies and
procedures that:
An amount of money charged for Process designed to 1. Pertain to the maintenance of
borrowing money or paid for the provide reasonable records that accurately and
use of somebody else’s money. assurance regarding fairly reflect the transactions
achievement of and dispositions of the assets of
  various management objectives the company.
Interim Dividend  such as the reliability of financial 2. Provide reasonable assurance
reports. that transactions are recorded
DIVIDEND declared and paid as necessary to permit
before annual earnings have   preparation of financial
been determined, generally Internal Control Over Financial statements in accordance with
quarterly. Reporting  GAAP and that receipts and
expenditures are being made
  A process designed by, or under only in accordance with
Interim Financial Statements the supervision of the authorizations of management
company's principal executive and directors of the company.
and principal financial officers 3. Provide reasonable assurance
FINANCIAL
or persons performing similar regarding prevention or timely
STATEMENTS that report the
functions and effected by the detection of unauthorized
operations of an entity for less
company's board of directors, acquisition, use or disposition of
than one year.
management, and other the company's assets that could
personnel, to provide have a material effect on the
 
reasonable assurance regarding financial statements.
Internal Audit 
the reliability of financial
reporting and the preparation of  
AUDIT performed within an
financial statements for external Internal Rate of Return 
entity by its staff rather than an
independent certified purposes in accordance with
public accountant. GENERALLY ACCEPTED
 Method that determines are used in businesses and other  
the discount rate at which organizations for financial Inventory Financing 
the present value of the reporting around the world. Its
future CASH FLOWS will exactly members are 143 professional Circumstance where loans in
equal investment outlay. accounting bodies in 104 excess of ACCOUNTS
countries. RECEIVABLE are made
  against inventory in anticipation
Internal Revenue Code    of future sales. Sometimes used
International Mutual Fund  as a synonym for OVER-
Collection of tax rules of the ADVANCES IN FACTORING.
federal government. Also MUTUAL FUND that invests in
referred to as Title 26 of the SECURITIES markets throughout  
United States Code. the world so that if one market Inventory Turnover 
is in a slump, money can still be
  made in others. A ratio used to indicate the
Internal Revenue Service (IRS)  number of times a COMPANY’s
  average inventory is sold during
Federal agency that administers Intrinsic Value  an accounting period.
the INTERNAL REVENUE CODE.
The IRS is part of the United Valuation determined by  
States TreasuryDepartment. applying data inputs to a Invest 
valuation theory or model.
  To put money into something
International Accounting Standards   such as property, stocks, or a
Committee (IASC) Inventory  business, in order to
earn INTEREST or make a profit.
An independent private sector Tangible property held for sale,
body, formed in 1973, with the or materials used in  
objective of harmonizing a production process to make a Investing  
the accounting principles which product.
 The practice of putting money   When a private company goes
into something, such as Investment Tax Credit  public for the first time.
property, in order to
earn INTEREST or make a profit. This is a component of the  
general business credit and IRA 
  consists of the following:
Investment  1. The energy credit; A personal savings plan that
2. The rehabilitation credit; and allows an individual to
EXPENDITURE used to purchase 3. The reforestation credit. make cash contributions per
goods or services that could year dependent on the
produce a return to the investor.   individual's adjusted gross
Invoice income and participation in an
employer's retirement plan.
Investment Banker  Bill prepared by a seller of goods Under a traditional IRA these
or services and submitted to the earnings are not taxable until
Firm, acting as underwriter or purchaser. the time of withdrawal from the
agent, that serves as plan.
intermediary between  
an issuer of SECURITIES and the Involuntary Conversions  
investing public. IRS
This is a conversion of property
  where it is in whole or part Federal agency that administers
Investment Income  destroyed, stolen, seized, the INTERNAL REVENUE CODE.
requisitioned or condemned (or The IRS is part of the United
Income from SECURITIES and where there is a threat or States TreasuryDepartment.
other non-business investments; imminence of requisition or
such as DIVIDENDS, INTEREST, condemnation).  
etc. ISB
 
IPO
 This is the private This term means an issuer, the A customer order for a specific
sector standard-setting body securities of which are number of specially designed,
governing the independence of registered under Section 12 of made-to-order products.
AUDITORs from their public the Securities Exchange Act of
company clients. It came about 1934, or that is required to file  
from discussions between reports under Section 15(d) of Joint Return 
the AICPA, that Act, or that files or has filed
other accounting representative a registration statement with A return filed by married
s and the SEC. the SEC that has not yet become taxpayers or surviving spouses.
effective under the Securities
  Act of 1933 and that it has not  
Issue  withdrawn. Joint Venture 

Stock or BONDS sold by J When two or more persons or

a CORPORATION or a organizations gather CAPITAL to
government entity at a   provide a product or service.
particular time. Jeopardy  Often carried out as a
PARTNERSHIP.
  If the IRS believes that collection
Issued and Outstanding of tax appears to be  
in jeopardy (danger of being Journal 
Shares of a CORPORATION, uncollected), it may immediately
authorized in the corporate assess and collect such tax. The Any book containing original
charter, which have been issued intermediate steps are bypassed. entries of daily financial
and are outstanding. transactions.
 
  Job Order   
Issuer  Journal Entry 
 A notation in the GENERAL Also known as an HR 10, this is a  
JOURNAL. It records a qualified retirement plan for self Key Person Insurance 
single transaction. employed who do not
incorporate their business. If Business-owned
  qualifications are met the life insurance contract typically
Junk Bonds  taxpayer may receive a on the lives of principal officers
deduction for contributions that normally provides for
DEBT SECURITIES issued by made. guaranteed death benefits to
companies with higher than the company and
normal credit risk. Considered   the accumulation of
"non-investment grade" bonds, Key Employee  a cash surrender value.
these SECURITIES
ordinarily yield a higher rate For purposes of rules that apply  
of interest to compensate for the to top heavy plans, a key Kiting 
additional risk. employee:
1. An officer of the employer Writing checks against a
  earning more than $130,000; bank account with insufficient
Just-In-Time  2. An individual who owns more funds to cover them, hoping that
than 5 percent of the employer; the bank will receive deposits
An overall operating philosophy 3. An individual who owns more before the checks arrive for
of INVENTORY management in than 1 percent of the employer clearance.
which all resources, including and compensation greater than
materials, personnel, and $150,000. L
facilities, are used only as
needed.    
Key Industry  Labor
K
Industry of primary importance Physical or mental effort; work.
  to a nation’s economy.
Keogh Plan 
  of a stock issue not subscribed be applied toward the purchase
Laissez-Faire  to by shareowners who hold of the property under lease.
rights.
Doctrine that interference of  
government in business and   Leasehold 
economic affairs should be Lease
minimal. Property INTEREST a LESSEE o
Conveyance of land, buildings, wns in the leased property.
  equipment or other ASSETS
Land  from one person (LESSOR) to  
another (LESSEE) for a Ledger 
Property; real estate. specific period of time for
monetary or other Any book of accounts containing
  consideration, usually in the the summaries
Last In, First Out (LIFO)   form of rent. of debit and credit entries.

ACCOUNTING method of    
valuing inventory under which Lease Acquisition Cost  Ledger Account 
the costs of the last goods
acquired are the first costs Price paid by a real A complete record of the
charged to expense. Commonly estate limited partnership, when transactions recorded in each
known as LIFO. acquiring a lease, including legal individual account.
fees and related expenses.
   
Lay Off    Lender 
Lease-Purchase Agreement 
Reduce the risk in standby Individual or firm that extends
commitment, under which the Agreement providing that money to a borrower with the
bankers agree to purchase and portions of lease payments may expectation of being repaid,
resell to the public any portion usually with INTEREST.
  Conditional bank commitment a transaction financed by the
Lending Securities  issued on behalf of a customer to issuance of DEBT instruments
pay a third party in accordance by the acquired entity.
SECURITIES borrowed from a with certain terms and
broker’s INVENTORY, conditions. The two primary  
other MARGIN accounts, or from types are commercial letters Leveraged Lease 
other brokers, when a customer of credit and standby letters of
makes a short sale and the credit. Transaction under which
securities must be delivered to the LESSOR borrows funds to
the buying customer’s broker.   acquire property which is leased
Letter of Intent  to a third party. The property
  and lease rentals are security for
Lessee Any letter expressing an the LESSOR'S indebtedness.
intention to take an action,
Person or entity that has the sometimes subject to other  
right to use property under the action being taken. Liability 
terms of a LEASE.
  DEBTS or OBLIGATIONS owed
  Leverage by one entity (DEBTOR) to
Lessor another entity (CREDITOR)
The use of borrowed funds to payable in money, goods, or
Owner of property, the increase the profit from services.
temporary use of which is an investment.
transferred to another (LESSEE)  
under the terms of a LEASE.   Lien
Leveraged Buy Out 
  CREDITOR’s claim against
Letter of Credit  Acquisition of a property. For example
controlling INTEREST in a MORTGAGE is a lien against a
a company in house.
  The reduction LIABILITY for all owners (called
Life Expectancy  of INVENTORY levels at year’s members) with taxation as a
end below beginning-of-the-year PARTNERSHIP. An LLC is
Age to which an average person levels for businesses using the formed by filing ARTICLES
can be expected to live, as LAST IN, FIRST OUT (LIFO) OF ORGANIZATION with an
calculated by an ACTUARY. inventory method. appropriate state official. Rules
governing LLCs vary
    significantly from state to state.
Lifetime Learning Credit  Limited Company 
 
This allows a credit for 20 A COMPANY, usually registered Limited Liability Partnership (LLP) 
percent of qualified tuition and in the United Kingdom, that is
fees paid by the taxpayer with organized to protect its owners GENERAL PARTNERSHIP which,
respect to one or more students from financial responsibility. via registration with an
for any year that the HOPE appropriate state authority, is
SHCOLARSHIP CREDIT is not   able to enshroud all its partners
claimed. Limited Liability  in LIMITED LIABILITY. Rules
governing LLPs vary
  The obligation of owners of significantly from state to state.
LIFO a CORPORATION, who are liable
only for the amount of  
ACCOUNTING method of their INVESTMENT and are not Limited Partnership
valuing inventory under which liable for the corporation’s
the costs of the last goods DEBTS. PARTNERSHIP in which one or
acquired are the first costs more partners, but not all,
charged to expense.   have LIMITED LIABILITY to
Limited Liability Company (LLC)  CREDITORS of the partnership.

LIFO Liquidation   Form of doing business

combining LIMITED Liquid Assets 
 Cash, cash equivalents, Limits are imposed on the determine the amount of money
and marketable SECURITIES. DEPRECIATION deduction a stolen or understated.
taxpayer may claim on certain
  listed property as follows:  
Liquidation   1. A passenger car; LLC
2. Other property used as
Winding up an activity by transportation; Form of doing business
distributing its ASSETS to the 3. Property used for purposes of combining LIMITED
appropriate parties and settling entertainment, recreation, or LIABILITY for all owners (called
its DEBTS. amusement; members) with taxation as a
4. A computer and peripheral PARTNERSHIP. An LLC is
  equipment; and formed by filing ARTICLES
Liquidity 5. Cellular telephone. OF ORGANIZATION with an
appropriate state official. Rules
Available money on hand to pay   governing LLCs vary
bills when they are due and to Litigation Support/Dispute significantly from state to state.
take care of unexpected needs Resolution 
for CASH.  
A service that CPAs often LLP
  provide to attorneys - e.g.,
Liquidity Ratio  expert testimony about GENERAL PARTNERSHIP which,
the value of a business or via registration with an
Measure of a firm’s ability to other asset, appropriate state authority, is
meet maturing SHORT- forensic accounting (a partner able to enshroud all its partners
TERM OBLIGATIONS. stealing from his other partners, in LIMITED LIABILITY. Rules
or a spouse understating governing LLPs vary
his income in a matrimonial significantly from state to state.
 
action). The lawyer hires the
Listed Property
CPA to do the investigation and  
Loan
 Transaction wherein an owner An ASSET that has the following  
of property, called characteristics: (1) it has a Long-Term Investment 
the LENDER allows another useful life of more than one year;
party, the borrower, to use the (2) it is acquired for use in the An INVESTMENT that managem
property. operation of a business; and (3) ent plans to hold for more than
it is not intended for resale to one year.
  customers.
Loan Value   
  Long-Term Liability 
Amount a LENDER is willing Long-Term Debt 
to LOAN against COLLATERAL. A DEBT that falls due more than
DEBT with a maturity of more one year in the future or beyond
  than one year from the current the normal OPERATING CYCLE,
Long Bond  date. or that is to be paid out of
noncurrent assets.
BOND that matures in more than  
10 years. Long-Term Gain   
Long-Term Loss 
  Subsequent to the Tax Reform
Long Term  Act of 1984 and prior to Negative counterpart to LONG-
provisions of the Tax Reform Act TERM GAIN as defined by the
HOLDING PERIOD of six months of 1986 effective in 1988, same legislation.
or longer, according to a gain on the sale of a
the Tax Reform Act of 1984 and capital asset where the  
applicable in calculating the HOLIDNG PERIOD was six Loss
CAPITAL GAINS tax until 1988. months or more and
the profit was subject to the Excess of EXPENDITURES over
  LONG-TERM CAPITAL GAINS REVENUE for a period or
Long-Term Asset  tax. activity. Also, for tax purposes,
 an excess of basis over the Single payment to a beneficiary Reporting designed to
amount realized in a transaction. covering the entire amount of an assist management in decision-
agreement. making, planning, and control.
  Also known as MANAGERIAL
Loss on Disposal of Plant and M ACCOUNTING.
Equipment 
   
The account in which a LOSS is Macroeconomics  Management Discussion and
recorded when a firm sells or Analysis (MD&A) 
trades in an ASSET and receives Analysis of a nation’s economy
an amount less than the BOOK as a whole, using such aggregate SEC requirement in financial
VALUE for that asset. data as price levels, reporting for an explanation
unemployment, INFLATION, and by management of significant
  industrial production. changes in operations, ASSETS,
Lower of Cost or Market  and LIQUIDITY.
 
Valuing ASSETS for financial Management  
reporting purposes. Ordinarily, Management's Report 
"cost" is the purchase price of Combined fields of policy and
the asset and "market" refers to administration and the people Management is required to
its current replacement who provide the decisions and include in its annual report its
cost. GENERALLY ACCEPTED supervision necessary to assessment of the effectiveness
ACCOUNTING PRINCIPLES implement the owner’s business of the company's internal
(GAAP) requires that certain objectives and achieve stability control over financial
assets (e.g., INVENTORIES) be and growth. reporting in addition to its
carried at the lower of cost or audited financial statements as
market.   of the end of the most
Management Accounting  recent fiscal year.
 
Lump-Sum Distribution 
  Excess of selling price over asset's carrying amount to
Managerial Accounting  the unit cost. its market value.

Reporting designed to    
assist management in decision- Margin of Profit  Markdown 
making, planning, and control.
Relationship of gross profits Amount subtracted from the
  to net sales. selling price, when a customer
Manipulation   sells SECURITIES to a DEALER in
  the OVER-THE-COUNTER marke
Buying or selling a SECURITY to Marginal Cost  t.
create a false appearance of
active trading and thus influence Increase or decrease in the  
other investors to buy or sell TOTAL COSTS of a Market 
shares. business firm as the result of
one more or one Public place where products or
  less unit of output. services are bought and sold,
Manufacture  directly or through
  intermediaries.
To make or process (a product), Marginal Tax Rate 
especially by using machines.  
Amount of tax imposed on an Market Capitalization 
  additional dollar of income.
Manufacturing Overhead  Value of a CORPORATION as
  determined by the MARKET
Another term for Mark-to-Market  PRICE of its ISSUED AND
FACTORY OVERHEAD COSTS. OUTSTANDING  COMMON
Method of valuing ASSETS that STOCK.
  results in adjustment of an
Margin 
  The price investors are willing Taxpayers that are married may
Market Index  to pay for a share of stock on the file a JOINT RETURN, therefore
open market. combining their INCOME and
Numbers representing weighted expenses. Individuals will be
values of the components that   considered married if:
make up the INDEX. Marketable Securities  1. They are living as husband
and wife;
  Stocks and 2. They are recognized living as
Market Interest Rate  other negotiable instruments common law marriage; or
which can be easily bought and 3. Legally married but separated
The rate of interest paid in sold on either and living apart but not legally
the MARKET on BONDS of listed exchanges or over-the- divorced.
similar risk. counter markets. Marriage is determined as of the
last day of the tax year.
   
Market Price  Marketing  
Matching Principle 
Last reported price at which Moving goods and services from
a SECURITY was sold on an the provider to consumer. A fundamental concept of
exchange. basic accounting. In any one
  given accounting period, you
  Markup should try to match the revenue
Market Share  you are reporting with the
The amount added to the price expenses it took to generate that
of a product by a retailer to revenue in the same time period,
Percentage of industry sales of a
arrive at a selling price. or over the periods in which you
particular COMPANY or product.
will be receiving benefits from
that expenditure. A simple
 
example
Market Value  Married Taxpayers  
is depreciation expense. If you
 buy a building that will last for   Date on which
many years, you don't write Materiality   the principal amount of
off the cost of that building all at a NOTE, DRAFT,
once. Instead, you take Magnitude of an omission or acceptance, BOND, or
depreciation deductions over misstatements other DEBT
the building's estimated useful of ACCOUNTING information INSTRUMENTbecomes due and
life. Thus, you've "matched" the that, in the light of surrounding payable.
expense, or cost, of the building circumstances, makes it
with the benefits it produces, probable that the judgment of a  
over the course of the years it reasonable person relying on the MD&A 
will be in service. information would change or be
influenced. SEC requirement in financial
  reporting for an explanation
Material   by management of significant
Materials Inventory Account  changes in operations, ASSETS,
The substance or substances and LIQUIDITY.
from which something is made. An INVENTORY account made
up of the balances of materials,  
  parts, and supplies on hand at a Merchandise
Material Weakness  given time.
Items that can be bought or sold;
A significant deficiency or commercial goods.
combination of significant Maturity 
deficiencies that results in more  
than a remote likelihood that a The time at which payment of Merchandise Inventory 
material misstatement of the a loan or BOND becomes due.
annual or interim financial The goods on hand at any one
statements will not be   time that are available for sale to
prevented or detected. Maturity Date   customers in the regular course
of business.
    Definite fixed amounts stated in
Merger Mixed Costs  terms of dollars, either by law or
by contract agreement.
BUSINESS COMBINATION that Costs that result when
occurs when one entity directly both VARIABLE  
acquires the ASSETS and COSTS and FIXED COSTS are Money Laundering 
LIABILITIES of one or more charged to the same GENERAL
entities and no LEDGER account. The use of an intermediate
new corporation or entity is agent, such as a bank, to disguise
created.   the source of money received
Modeling from illegal activities.
 
Microeconomic Pricing Model Designing and manipulating a  
mathematical representation of Money Market 
An accounting model that is an economic system or
based on the economic theory corporate financial application MARKET for SHORT-TERM
that profit will be greater when so that the effect of changes can DEBT instruments.
the difference between total be studied and forecast.
revenue and TOTAL COST is the  
greatest.   Monopoly
Modified Accelerated Cost Recovery
System Control of the production and
Microeconomics  distribution of a product or
A mandatory system service by one firm or a group of
Study of the behavior of basic of DEPRECIATION for income ta firms acting in concert.
economic units such as x purposes, enacted by Congress
companies, industries, or in 1986.  
households. Mortgage 
 
Monetary Items 
 Legal instrument evidencing which is typically exempt from accountancy in the United
a security interest in ASSETS, federal taxation. States.
usually real estate. Mortgages
serve as COLLATERAL for   NASDAQ
PROMISSORY NOTES. Mutual Agency 
National Association of
  The ability of each partner in Securities Dealers Automated
Moving Average  a COMPANY to act as an agent of Quotations system, which is
the company. owned and operated by the
Average of SECURITY or National Association of
COMMODITY prices constructed   Securities Dealers; a
on a period as short as a few Mutual Fund  computerized system that
days or as long as several years provides brokers and dealers
and showing trends for the Investment company which with price quotations for
latest interval. generally offers its shares to the securities traded OVER-THE-
general public and invests the COUNTER as well as for
  proceeds in a many NEW YORK STOCK
Moving Average Method  diversified portfolio of EXCHANGE (NYSE) listed
SECURITIES. securities.
A modified version of
the WEIGHTED-AVERAGE-COST N National Association of Securities
METHOD. It is used to compute Dealers Automated Quotations
the average cost of a NASBA (NASDAQ)
PERPETUAL INVENTORY.
Serves as a forum for the 54 National Association of
  State Boards of Accountancy, Securities Dealers Automated
Municipal Bond  which administer the uniform Quotations system, which is
CPA examination, license owned and operated by the
BOND issued by a government Certified Public Accountants and National Association of
or public body, the INTEREST on regulate the practice of public Securities Dealers; a
 computerized system that   Negligence
provides brokers and dealers
with price quotations for NAV The omission to do something
securities traded OVER-THE- which a reasonable man, guided
COUNTER as well as for In mutual funds, the MARKET by those ordinary
many NEW YORK STOCK VALUE of a fund share, considerations which ordinarily
EXCHANGE (NYSE) listed synonymous with bid regulate human affairs, would
securities. price; BOOK VALUE of a do, or the doing of something
company’s different classes of which a reasonable and prudent
  securities, usually stated man would not do. Negligence is
as NET ASSET value per BOND, the failure to use such care as a
National Association of State Boards net asset value per share of reasonably prudent and careful
of Accountancy (NASBA) PREFERRED STOCK, and net person would use under similar
book value per common share circumstances; it is the doing of
Serves as a forum for the 54 of COMMON STOCK. some act which a person of
State Boards of Accountancy, ordinary prudence would not
which administer the   have done under similar
uniform CPA examination, circumstances or failure to do
license Certified Public Negative Assurance what a person of ordinary
Accountants and regulate the prudence would have done
practice of public accountancy in Report issued by under similar circumstances.
the United States. an ACCOUNTANT based on The term refers only to that legal
limited procedures that states delinquency which results
  that nothing has come to the whenever a man fails to exhibit
accountant's attention to the care which he ought to
Nationalization indicate that the financial exhibit, whether it be slight,
information is not fairly ordinary, or great. It is
presented. characterized chiefly by
Takeover of a private company’s
inadvertence, thoughtlessness,
assets or operations by a
inattention, and the like, while
government.  
 "wantonness" or "recklessness" Net Asset Value (NAV) another name for WORKING
is characterized by willfulness. CAPITAL.
The law of negligence is founded In mutual funds, the MARKET
on reasonable conduct or VALUE of a fund share,  
reasonable care under all synonymous with bid
circumstances of particular care. price; BOOK VALUE of a Net Income
Doctrine of negligence rests on company’s different classes of
duty of every person to exercise securities, usually stated Excess or DEFICIT of
due care in his conduct toward as NET ASSET value per BOND, total REVENUES and GAINS
others from which injury may net asset value per share of compared with total expenses
result. PREFERRED STOCK, and net and losses for an
book value per common share ACCOUNTING period.
  of COMMON STOCK.
 
Negotiable  
Net Leas
Something that can be sold or Net Assets
transferred to another party in In addition to the rental
exchange for money or as Excess of the value of payment, the LESSEE assumes
settlement of an obligation. SECURITIES owned, cash, all property charges such as
receivables, and other ASSETS taxes, insurance, and
  over the LIABILITIES of the maintenance.
company.
Net  
 
Figure remaining after all Net Loss
relevant deductions have been Net Current Assets
made from the gross amount. The difference between
Difference between current expenses and REVENUES when
  assets and current liabilities;
 expenses exceed revenues over Amount received from York City; also known as the Big
a period of time. the sale or disposition of Board and The Exchange.
property, from a LOAN, or from
  the sale or issuance of securities  
after deduction of all costs
Net Present Value (NPV) incurred in the transaction. No-Par Stock

Method used in evaluating   Stock authorized to be issued

investments whereby but for which no PAR VALUE is
the net present value of Net Sales set in the ARTICLES
all CASH outflows and cash OF INCORORATION. A STATED
inflows is calculated using a Sales at gross invoice amounts VALUE is set by the BOARD OF
given DISCOUNT RATE, less any adjustments for returns, DIRECTORS on the issuance of
usually required rate of return. allowances, or discounts taken. this type of stock.

     

Net Present Value Method Net Worth No-Par Value

A Similar to EQUITY, the excess of Stock or bond that does not have

capital INVESTMENT evaluation ASSETS over LIABILITIES. a specific value indicated.
method that discounts
future CASH FLOWS to    
their PRESENT VALUE.
New York Stock Exchange (NYSE) Non Routine Transactions
 
Oldest and largest stock Activities that occur only
Net Proceeds exchange in the United States, periodically, the data involved
located at 11 Wall Street in New
 are generally not part of the A CHECK drawn against Note
routine flow of transactions. an ACCOUNT in which there is
not enough money to honor it. Written promise to pay a
  specified amount to a certain
  entity on demand or on a
Non-Callable specified date.
Nonresident Alien
PREFERRED  
STOCK or BOND that cannot be Any citizen that is not a resident
redeemed at the OPTION of or citizen of the United Notes Payable
the ISSUER. States. Income of such
individuals is subject to taxation Collective term for written
  if it is effectively connected with promissory notes that are due in
a United States trade or less than one year.
Non-for-Profit Organization/Tax- business.
Exempt Organization  
 
An Notes Receivable
incorporated organization whic Not-for-Profit
h exists for educational or Collective term for written
charitable purposes, and from Type of promissory notes that are due in
which its shareholders or incorporated organization in less than one year and are held
trustees do not benefit which by the entity to whom payment
financially. Also called NOT- no stockholder or TRUSTEE shar is promised.
FOR-PROFIT organization. es in profits or losses and which
usually exists to accomplish  
  some charitable, humanitarian,
or educational purpose. Notional
Non-Sufficient Funds (NSF) Check
 
 Value assigned to ASSETS or Oldest and largest stock OCBOA
LIABILITIES that is not based on exchange in the United States,
cost or market (e.g., the value of located at 11 Wall Street in New Consistent accounting basis
a service not yet rendered). York City; also known as the Big other than GENERALLY
Board and The Exchange. ACCEPTED ACCOUNTING
  PRINCIPLES (GAAP) used for
  financial reporting. Examples
NPV include an INCOME TAX
O BASIS or a CASH BASIS.
Method used in evaluating
investments whereby Objectivity   
the net present value of
all CASH outflows and cash Emphasizing or expressing the Offer
inflows is calculated using a nature of reality as it is apart
given DISCOUNT RATE, from personal reflection or Price at which someone who
usually required rate of return. feelings; independence of mind. owns a SECURITY offers to sell
it.
  Obligations
 
NSF Check Any amount which may require
payment by an entity at a future Offering Price
A CHECK drawn against time.
an ACCOUNT in which there is Price per share at which a new
not enough money to honor it. Obsolescence or secondary distribution of
securities is offered for sale to
  The process of becoming out-of- the public.
date.
NYSE  
 
 OPEB   handles all maintenance and
servicing.
All post-retirement Operating Cycle
benefits other than pensions,  
provided by employers to Period of time between
employees. the acquisition of goods and Operating Profit (or Loss)
services involved in the
  manufacturing process and the The difference between
final cash realization resulting the REVENUES of a business and
Open-End Mutual Fund from sales and subsequent the related costs and expenses,
collections. excluding INCOME derived from
MUTUAL FUND that does not a sources other than its regular
have a fixed number of shares   activities and before income
outstanding, offers new shares deductions.
to the public, and buys back Operating Expense
outstanding shares at market  
value. An EXPENSE other than COST
OF GOODS SOLD that is incurred Opportunity Cose
  in running a business.
Highest price or rate of
Operating Agreement   return an alternative course of
action would provide.
Agreement, usually a written Operating Lease
document, that sets out the rules  
by which a LIMITED LIABILITY Type of LEASE, normally
COMPANY (LLC) is to be involving equipment, whereby Option
operated. It is the LLC the CONTRACT is written for
equivalent of considerably less than the life of
corporate BYLAWS or the equipment and the lesser
a PARTNERSHIP agreement.
 Right to buy or sell something at The act of arranging something Other Comprehensive Basis of
a specified price during a in an orderly way. Accounting (OCBOA)
specified time period.
  Consistent accounting basis
  other than GENERALLY
Organization Expenditures ACCEPTED ACCOUNTING
Ordinary Annuity  PRINCIPLES (GAAP) used for
The costs of organizing financial reporting. Examples
A series of equal payments made a trade or business or include an INCOME TAX
at the end of equal intervals of for profit activity before it BASIS or a CASH BASIS.
time, with compound interest on begins active business. A
these payments. taxpayer may elect to amortize  
such expenses for a tern no less
  than 60 months. If the election is Other Post-Retirement Employee
not made then the expenses are Benefit (OPEB)
Ordinary Income not deductible and may only be
recovered when the business All post-retirement
One of two classes ceases operation or is sold. benefits other than pensions,
of income (the other being provided by employers to
CAPITAL GAINS) taxed under   employees.
the INTERNAL REVENUE CODE.
Historically, ordinary income is Original Cost  
taxed at a higher rate than
capital gains. In ACCOUNTING, all costs Output
associated with
  the acquisition of an ASSET. An amount of something
produced, especially during a
Organization   given period of time.

 
 Outsourcing Sold to customers at retail and  
without any special restrictions.
The act or an instance of P
purchasing essential products or  
services from  
another COMPANY. Overhead P/E Ratio 

  Costs of a business that are not A ratio that is used as a way of

directly associated with measuring investor confidence
Outstanding the production or sale of goods in a COMPANY and comparing
or services. stocks for profitability. It is
Not settled or paid. found by dividing MARKET
  PRICE per share by EARNINGS
  PER SHARE (EPS).
Overhead Application Rate
Outstanding Check   
Standard rate used to calculate Paid in Capital 
A CHECK that has been written the OVERHEAD cost of a given
by the drawer and deducted on activity. Activity often measured Portion of the
his or her records but has not in LABOR or machine hours. stockholders' EQUITY which
reached the bank for payment was paid in by the stockholders,
and is not deducted from the   as opposed to CAPITAL arising
bank BALANCE by the time the from profitable operations.
bank issues its statement. Owner’s Equity 
 
  The residual INTEREST in the Par
assets of a business entity that
Over-the-Counter remains after deducting the Equal to the nominal or face
entity’s liabilities. value of a SECURITY.
  a CORPORATION'S shareholders, members and customers based
Par Value  the partnership's general on the quantity or value of
partners are liable for the business conducted with or for
Amount per share set in the DEBTS of the partnership. the members during the tax
ARTICLES year.
OF INCORPORATION of a  
CORPORATION to be entered in Passive Activity Loss   
the CAPITAL Payback Period
STOCKS account where it is left LOSS generated from activities
permanently and signifies a involved in the conduct of In capital budgeting; the length
cushion of EQUITY capital for a trade or business in which the of time needed to recoup
the protection of CREDITORS. taxpayer does not materially the cost of capital investment.
participate.
   
Parent Company    Payback Period Method 
Passive Income 
Company that has a A way of judging capital
controlling interest in Includes income derived from investments that bases the
the COMMON STOCK of another. such sources decision to invest in capital
as dividends, interest, royalties, equipment on the minimum
  rents, amounts received from length of time it will take to earn
Partnership personal service contracts, and back in CASH the amount of the
income received as a beneficiary initial INVESTMENT.
Relationship between two or of an estate or trust.
more persons based on a  
written, oral, or implied   Payout Ratio 
agreement whereby they agree Patronage Dividends 
to carry on a trade or business Percentage of a firm’s profits
for profit and share the resulting These dividends are amounts that is paid out to shareholders
profits. Unlike paid by a cooperative to its in the form of DIVIDENDS.
  The various government codes taken at the end of
PCAOB contain numerous provisions an accounting period.
which impose penalties on a
A private-sector, non- taxpayer (any type of taxpayer)  
profit corporation, created by for failure to perform a specific Periodicity
the Sarbanes-Oxley Act of 2002, act or omitting vital information
to oversee the AUDITORs of on a return. The recognition that NET
public companies in order to INCOME for any PERIOD less
protect the interests of investors   than the life of the business,
and further the public interest in Pension although tentative, is still a
the preparation of informative, useful estimate of net income for
fair, and Retirement plan offered by an that period.
independent audit reports. employer for the benefit of an
employee, usually at retirement,  
  through a TRUSTEEwho Perpetual Inventory
Peer Review  controls the plan ASSETS.
System that requires a
Process by which   continuous record of all receipts
an accounting firm's practice is Period and withdrawals of each item
evaluated for compliance with of INVENTORY.
professional standards. The An interval of time with a
objective is achieved through specified length or characterized  
the performance of an by certain conditions. Personal Financial Planning 
independent review by one's
peers.   Process for arriving at a
Periodic Inventory System  comprehensive plan to solve an
  individual's personal, business,
Penalty A system for and financial problems and
determining INVENTORY on concerns.
hand by a physical count that is
  items, such as royalties, patents  
Personal Financial Specialist (PFS) and copyrights. Physical Inventory 

CERTIFIED   An actual count of

PUBLIC ACCOUNTANT who Petty Cash all MERCHANDISE on hand at
specializes in PERSONAL the end of an accounting period.
FINANCIAL PLANNING and A small amount of CASH that
completes a series of a company keeps on hand to pay  
requirements that include for minor expenses in an office. Plant
education, experience, ethics
and an exam. A building or group of buildings
PFS where something is made or
  processed; factory.
Personal Financial Statements  CERTIFIED
PUBLIC ACCOUNTANT who  
FINANCIAL specializes in PERSONAL Pledged
STATEMENTS prepared for an FINANCIAL PLANNING and
individual or family to show completes a series of ASSET placed in a TRUST and
financial status. requirements that include used as COLLATERAL for
education, experience, ethics a DEBT.
  and an exam.
Personal Property  
  POB 
Movable property that is not Phantom Income
affixed to the land (REAL The POB is an independent
PROPERTY). Personal Income reported on a TAX oversight board, composed of
property includes tangible items BASIS for which no cash or public members, which
such as cash, cars and financial benefit is realized. monitors and evaluates peer
computers, as well as intangible reviews conducted by
the SEC Practice Section (SECPS)
 of the AICPA's Division for CPA A trial BALANCE prepared at the Right giving existing
Firms as well as other activities end of stockholders the opportunity to
of the SECPS. an accounting period after all purchase shares of a
adjusting and closing entries new ISSUE before it is offered to
have been posted; a final check others.
Pooling of Interest  on the balance of the LEDGER.
 
Used to account for   Preferred Stock 
the acquisition of Post-Retirement Benefits 
another company when the Type of CAPITAL STOCK that
acquiring PENSIONS, health care, carries certain preferences
company exchanges its voting life insurance and other benefits over COMMON STOCK, such as a
COMMON STOCK for the voting that are provided by an prior claim on DIVIDENDS and
common stock of the acquired employer to retirees, their ASSETS.
company when certain criteria dependents, or survivors.
are met.
  Premium
  Predetermined Overhead Rate 
Portfolio (1) Excess amount paid for
A rate that is used as a way of a BOND over its face amount. (2)
Combined holding of more than estimating and In insurance, the cost of
one stock, BOND, assigning OVERHEAD costs to specified coverage for a
commodity, real products or jobs for each designated period of time.
estate investment, cash equivale department or
nt, or other ASSET by an operating unit before the end of  
individual or institutional an accounting period. Premium Bond 
investor
  BOND with a selling price above
  Preemptive Right  face or REDEMPTION VALUE.
Post-Closing Trial Balance 
  These have the objective of  
Prenuptial Contract  preventing errors or fraud from Prime Rate 
occurring in the first place that
Agreement between a future could result in a misstatement of Rate of INTEREST charged by
husband and wife that details the financial statements. major U.S. banks on loans made
how the couple’s financial affairs to their preferred customers.
are to be handled both during  
the marriage and in the event of Price Range   
divorce. Principal
High/low range in which a stock
  has traded over a Face amount of a SECURITY,
Prepaid Expense  particular period of time. exclusive of
any PREMIUM or INTEREST. The
Cost incurred to acquire   basis for INTEREST
economically useful goods or Price/Earnings (P/E) Ratio  computations.
services that are expected to be
consumed in the revenue- A ratio that is used as a way of  
earning process within measuring investor confidence Private Placement 
the operating cycle. in a COMPANY and comparing
stocks for profitability. It is Sales of SECURITIES not
  found by dividing MARKET involving a PUBLIC
Present Value  PRICE per share by EARNINGS OFFERING and exempt from
PER SHARE (EPS). registration pursuant to certain
CURRENT VALUE of a given EXEMPTIONS.
future CASH flow stream,  
discounted at a given rate. Primary Earnings Per Share   
Privilege 
  Earnings available to COMMON
Preventive Controls  STOCK divided by the number of A right or immunity granted as a
common shares OUTSTANDING. peculiar benefit advantage.
     
Privity Production Profit Sharing Plan 

An interest in The act or process of creating DEFINED CONTRIBUTION

a transaction, contract or legal something. PLAN characterized by the
action to which one is not a setting aside of a portion of an
party, arising out of a entity's profits in participant's
relationship to one of the Profit accounts.
parties.
Positive difference that results  
  from selling products and Profitability 
Pro Forma  services for more than the cost
of producing these goods. The ability to earn
Presentation of financial enough INCOME to attract and
information that gives effect to   hold INVESTMENT capital.
an assumed event Profit Margin 
(e.g., MERGER).  
Used to measure the percentage Projection 
  of each sales dollar that results
Pro Rata in NET INCOME. Prospective FINANCIAL
STATEMENTS that include one
Distribution of an expense, fund,   or more hypothetical
or DIVIDEND proportionate Profit Margin Pricing assumptions.
with ownership.
An approach to cost-based  
  pricing in which price is Promissory Note  
Product Line  computed using a percentage of
a product’s total costs and Evidence of a DEBT with specific
The place in a factory where expenses. amount due and interest rate.
products are made. The note may specify a maturity
 date or it may be payable on Forecast: Prospective financial A prospectus generally
demand. The promissory statements that present, to the describes SECURITIES
note may or may not accompany best of the responsible party's or partnership interests to be
other instruments such as knowledge and belief, an entity's issued and sold.
a MORTGAGEproviding security  expected financial position,
for the payment thereof. results of operations, and
changes in financial position. A Proxy
  financial forecast is based on the
Property, Plant, and Equipment  responsible party's assumptions Document authorizing someone
reflecting conditions it expects other than the shareholder to
Long-term tangible assets used to exist and the course of action exercise the right to vote the
in the continuing operation of a it expects to take. Projection: stock owned by the shareholder.
business for a long time. Prospective financial statements
that present, to the best of the  
  responsible party's knowledge Public Company Accounting
Proprietorship and belief, given one or more Oversight Board (PCAOB) 
hypothetical assumptions, an
Business owned by an individual entity's expected financial A private-sector, non-
without the limited position, results of operations, profit corporation, created by
liability protection of and changes in financial the Sarbanes-Oxley Act of 2002,
a CORPORATION or a LIMITED position. to oversee the AUDITORs of
LIABILITY COMPANY (LLC). Also public companies in order to
known as   protect the interests of investors
SOLE PROPRIETORSHIP. Prospectus  and further the public interest in
the preparation of informative,
  Major part of the fair, and
Prospective Financial Information registration statement filed with independent audit reports.
(Forecast and Projection)  the SECURITIES AND
EXCHANGE COMMISSION  
(SEC) for PUBLIC OFFERINGS. Public Offering 
 Offering shares to the public. Written authorization to credits on ACCOUNT, and other
Generally done through SEC a vendor to deliver specified allowances made by suppliers
filings. goods or services at a stipulated for unsatisfactory or
price. incorrect MERCHANDISE that
  was originally purchased for
Public Oversight Board (POB)    resale.
Purchases 
The POB is an independent  
oversight board, composed of A temporary ACCOUNT used Push-Down Accounting
public members, which under the PERIODIC
monitors and evaluates peer INVENTORY SYSTEM to record Method of ACCOUNTING in
reviews conducted by the TOTAL COST of all which the values that arise from
the SEC Practice Section (SECPS) MERCHANDISE purchased for an acquisition are transferred or
of the AICPA's Division for CPA resale during "pushed down" to the accounts
Firms as well as other activities an accounting period. of an acquired company.
of the SECPS.
   
  Purchases Discounts  Puts
Purchase Method of Accounting
Discounts taken by merchants A put is an option to sell a
ACCOUNTING for a MERGER by in return for prompt payment certain number of shares of
adding the acquired company's for MERCHANDISE purchased stock at a stated price within a
ASSETS at the price paid for for resale. certain period. The gain or
them to the acquiring company's loss on a put is short or long
assets. Purchases Returns and Allowances  term depending on the holding
period of the stock involved.
  A CONTRA ACCOUNT used
Purchase Order under the PERIODIC Q
INVENTORY SYSTEM to
accumulate CASH refunds,
     
Qualified Opinion Quality Quarterly Reports

AUDIT opinion that states, An operating environment in Another term for INTERIM

except for the effect of a matter which a company’s product or FINANCIAL STATEMENTS.
to which a qualification relates, service meets a customer’s
the FINANCIAL specifications the first time it is  
STATEMENTS are fairly produced or delivered. Quasi-Reorganization
presented in accordance
with GENERALLY ACCEPTED   Type of reorganization in which,
ACCOUNTING PRINCIPLES Quantitative Analysis with shareholder approval,
(GAAP). The AUDITOR is the management revalues
required to qualify when there is Analysis dealing with ASSETS and eliminates the
a scope limitation. measurable factors as DEFICIT (increased by asset
distinguished from devaluations if any) by charging
  such QUALITATIVE consideratio it to other EQUITY accounts
Qualitative ns as the character without the creation of a new
of management or the state of corporate entity or without
Relating to quality, especially as employee morale. court intervention.
distinguished from quantity or
amount.    
Quantity Quick Assets
 
Qualitative Analysis An amount or number. Assets that are or are expected
to be converted into CASH in the
Analysis that evaluates   near term: cash, accounts
important factors that cannot be Quarter receivable, SHORT-TERM
precisely measured. INVESTMENTS.
Three-month intervals of the
year.
   as an interest; the COST OF Piece of land and all physical
Quick Ratio CAPITAL; the cost of money. property related to it, including
houses, fences, landscaping, and
The relationship of a   all rights to the air above and
company’s QUICK ASSETS to its Ratio Analysis earth below the property.
current liabilities.
Comparison of actual or  
R projected data for a Real Estate Investment Trust (REIT)
particular company to other
  data for that company or Investor-owned TRUST which
R&D industry in order to analyze invests in real estate and,
trends or relationships. instead of paying income tax on
Research is a planned activity its income, reports to each of its
aimed at discovery of new   owners his or her pro
knowledge with the hope of Raw Material rata share of its income for
developing new or improved inclusion on their income tax
products and services. Something in its natural state returns. This unique trust
Development is the translation that will be used in a arrangement is specifically
of research findings into a plan manufacturing process. provided for in the INTERNAL
or design of new or improved REVENUE CODE.
products and services.  
Raw Materials Inventory Account  
  Real Estate Mortgage Investment
Rate of Return Another term for MATERIALS Conduit (REMIC)
INVENTORY ACCOUNT.
The amount An entity that holds a fixed pool
of PROFIT or INTEREST earned   of mortgages and issues multiple
on an INVESTMENT, usually Real Estate classes of interests in itself to
expressed as a percentage, such investors. A qualified REMIC is
generally taxed like
 a partnership, unless it takes   that material misstatements will
contributions after its start up Real Rate of Return not be prevented or detected on
day or engages in a a timely basis. It is a high level of
prohibited transaction. RETURN on assurance.
an INVESTMENT adjusted
  for INFLATION.  
Real Income Rebate
 
Income of an individual, group, Realization In lending, UNEARNED
or country adjusted for changes INTEREST refunded to a
in purchasing power caused Conversion into CASH, as borrower if the LOAN is paid off
by INFLATION. happens in the sale of asset. before MATURITY.

     
Real Interest Rate Realized Profit (or Loss) Recapitalization

Current INTEREST PROFIT or LOSS resulting from An internal reorganization of

RATE minus INFLATION RATE. the sale or other disposal of a corporation including a
a SECURITY. rearrangement of the capital
  structure by changing the kind
Real Property   of stock or the number of shares
Reasonable Assurance outstanding or issuing stock
LAND and improvements, instead of bonds. It is
including buildings Management's assessment of the distinguished from most other
and PERSONAL PROPERTY, that effectiveness of internal control types of reorganization because
is permanently attached to the over financial reporting is it involves only one corporation
land or customarily transferred expressed at the level and is usually accomplished by
with the land. of reasonable assurance. It the surrender by shareholders
includes the understanding that of their securities for other stock
there is a remote likelihood or securities of a different type.
    an offer to sell or the solicitation
Receivable Turnover Reconciliation of an offer to buy.

A ratio for measuring the Comparison of two numbers to  

relative size of a company’s demonstrate the basis for the Redemption Value
accounts receivable and the difference between them.
success of its CREDIT and Price to be paid by an ENTITY
collection policies during   to retire its BONDS
an accounting period. Recovery or PREFERRED STOCK.

  Period in a business cycle when  

Receivables economic activity picks up and Refinancing Agreement
the gross national product
Amounts of money due from grows, leading into the Arrangement to
customers or other DEBTORS. expansion phase of the cycle. provide funding to replace
existing financing, the most
    common being a refinance of a
Recession Red Herring home MORTGAGE.

Downturn in economic activity, "Pre-release" PROSPECTUS offer

defined by many economists as ing. An announcement of a Refunding
at least two consecutive future issuance of SECURITIES,
quarters of decline in a country’s given restricted circulation Replacing an old DEBT with a
gross national product. during the waiting period of 20 new one, often in order to lower
days or other specified period the INTEREST costs of
  between the filing of a the issuer.
Reconcile registration statement with the
SEC and the effective date of the  
To resolve. statement. A red herring is not Registrar
 Agency responsible for keeping Commonly called a MUTUAL the INTEREST from a BOND or
track of the owners of bonds and FUND, this is a other fixed-income SECURITY.
the issuance of stock. domestic corporation that acts
as an investment agent for its  
  shareholders by REIT
Regression Analysis typically investing in
government and corporate Investor-owned TRUST which
Statistical technique used to securities and distributing invests in real estate and,
establish the relationship of a the DIVIDENDS andINTEREST in instead of paying income tax on
dependent variable, such as the come earned from such its income, reports to each of its
sales of a COMPANY, and one or investments. In order to be owners his or her pro
more independent variables, considered a RIC a rata share of its income for
such as family formations, gross CORPORATION must make an inclusion on their income tax
national product, per irrevocable election tax election returns. This unique trust
capita income, and other in order to be treated as one. arrangement is specifically
economic indicators. provided for in the INTERNAL
  REVENUE CODE.
  Reinsurance
Regressive Rate  
Process by which Related Party Transaction
Rate that decreases as the an insurance company obtains
calculation base increases. Often insurance on its insurance Business or
used to describe taxes where the claims with other insurers in other transaction between
TAX rate paid decreases as order to spread the risk. persons who do not have an
the TAXABLE INCOME increases. arm's-length relationship (e.g., a
relationship with independent,
  Reinvestment Rate competing interests). The most
Regulated Investment Company common is between family
(RIC) RATE OF RETURN resulting members or controlled entities.
from the reinvestment of For tax purposes, these types of
 transactions are generally a CORPORATION there are An oral or written description of
subject to a greater level of seven statutory options something, such as a book,
scrutiny. for reorganization that would event, or situation.
cause the corporation and
  shareholders to not recognize  
Relevant Assertions any GAIN or LOSS on the Report Release Date
exchange of stock.
Assertions that have a The date the company's financial
meaningful bearing on whether   statements are issued.
the account is fairly stated. Repairs
 
  EXPENDITURES made in order Repos
REMIC to keep property in good
condition but that do not Agreement whereby an
An entity that holds a fixed pool appreciably prolong the life or institution purchases SECURITIE
of mortgages and issues multiple increase the value of the S under a stipulation that the
classes of interests in itself to property. seller will repurchase the
investors. A qualified REMIC is securities within a certain
generally taxed like time period at a certain price.
a partnership, unless it takes Replacements
contributions after its start up  
day or engages in a EXPENDITURES for making Repurchase Agreement (Repos)
prohibited transaction. good or whole the portions of
property that have deteriorated Agreement whereby an
  through use or have been institution purchases SECURITIE
Reorganization destroyed through accident. S under a stipulation that the
seller will repurchase the
This is a change in the   securities within a certain
businesses capital Report time period at a certain price.
arrangements. If for
  The EXPENSE of FUNDING RESE The estimated NET scrap,
Required Rate of Return ARCH AND DEVELOPMENT salvage, or trade-in value of a
(R&D). TANGIBLE ASSET at the
RETURN required by investors estimated date of disposal.
before they will commit money  
to an INVESTMENT at a given Reserve  
level of risk. Restricted Assets
ACCOUNT used to earmark a
  portion of EQUITY or Cash or other ASSETS whose use
Rescind fund balance to indicate that it is in whole or in part is restricted
not available for expenditure. An for specific purposes bound by
Cancel a CONTRACT agreement. obsolete term in the United virtue of contracted agreements.
States. More commonly used in
  Europe.  
Research and Development (R&D) Restricted Fund
 
Research is a planned activity Resident Alien Fund established to account for
aimed at discovery of new assets whose income must be
knowledge with the hope of This is an individual that is not a used for purposes established by
developing new or improved citizen, but who has a residence donors or grantors of such
products and services. in the United States. They are ASSETS.
Development is the translation taxed on all of their
of research findings into a plan INCOME worldwide in the same  
or design of new or improved manner a citizen of the United Restructuring
products and services. States is.
Reorganization within an
    entity. Restructuring may occur
Research and Development Costs Residual Value in the form of changing the
components of CAPITAL,
 renegotiating the terms To take something, such as dividing NET INCOME by
of DEBT agreements, etc. a BOND, out of circulation. average OWNER'S EQUITY.

     
Retail Method Return Return on Investment (ROI)

A way of PROFIT on a securities or Ratio measure of the profits

estimating INVENTORY, used in capital INVESTMENT, usually achieved by a firm through its
retail business. expressed as an annual basic operations. An indicator
percentage rate. of management's general
  effectiveness and efficiency. The
Retained Earnings    simplest version is the ratio
Return on Assets of NET INCOME to total ASSETS.
Accumulated undistributed
earnings of a company retained A measurement of a  
for future needs or for future company’s PROFITABILITY or Return on Sales
distribution to its owners. overall earning power, that is,
how efficiently a company uses NET pretax profits as a
  its assets to produce INCOME. It percentage of NET SALES. A
Retained Earnings Account is found by dividing INCOME by useful measure of overall
average total assets. operational efficiency when
The ACCOUNT that reflects the compared with the prior periods
stockholders’ claim to the assets   or with other companies in the
earned from operations and Return on Equity same line of business.
reinvested in corporate
operations. A measurement  
of PROFITABILITY that relates Revenue Recognition  
the amount earned by a business
Retire to the stockholders’ investments Method of determining whether
in the business. It is found by or not income has met the
 conditions of being earned and ACCOUNTANT (CPA) and his or Right granted by the Federal
realized or is realizable. her client to perform a review. Consumer Credit Protection Act
of 1968 to void
    a CONTRACT within three
Revenues Review Report business days with full refund of
any down payment and
Sales of products, merchandise, See Accountants' Report without penalty.
and services; and earnings
from INTEREST, DIVIDEND,  
rents. RIC Right to Setoff

  Commonly called a MUTUAL DEBTOR'S legal right, to

Review FUND, this is a discharge all or a portion of
domestic corporation that acts the DEBT owed to another party
Accounting service that provides as an investment agent for its by applying against the debt an
some assurance as to the shareholders by amount that the other party
reliability of financial typically investing in owes to the debtor.
information. In a review, a government and corporate
CERTIFIED PUBLIC securities and distributing  
ACCOUNTANT (CPA) does not the DIVIDENDS and Risk
conduct an examination INTEREST income earned from
under GENERALLY ACCEPTED such investments. In order to be Measurable possibility of losing
AUDITING STANDARDS (GAAS). considered a RIC a or not gaining value.
CORPORATION must make an
  irrevocable election tax election  
Review Engagement in order to be treated as one. Risk Averse

Agreement between   Term referring to the

a CERTIFIED PUBLIC Right of Rescission assumption that, given the
same RETURN and
 different RISK alternatives, a   its stockholders in a manner
rational investor will seek ROI similar to that of
the SECURITY offering the least a PARTNERSHIP.
risk. Ratio measure of the profits
achieved by a firm through its  
  basic operations. An indicator Safe Harbor Rule
Risk Management of management's general
effectiveness and efficiency. The Concept in statutes and
Process of identifying and simplest version is the ratio regulations whereby a person
monitoring business risks in a of NET INCOME to total ASSETS. who meets listed requirements
manner that offers a will be preserved from adverse
RISK / RETURN relationship   legal action. Frequently, safe
that is acceptable to an entity's Routine Transactions harbors are used where a legal
operating philosophy. requirement is somewhat
Recurring financial activities ambiguous and carries a risk of
  reflected in punishment for an unintended
Risk-Adjusted Discount Rate the accounting records in the violation.
normal course of business.
In portfolio theory and  
capital budget analysis, the rate S Sale
necessary to determine
the PRESENT VALUE of an   Any exchange of goods or
uncertain or risky stream S Corporation services for money.
of INCOME; it is the RISK-free
rate plus a risk premium that is A CORPORATION which, under  
based on an analysis of the risk the INTERNAL REVENUE CODE, Sale-Leaseback Transaction
characteristics of the is generally not subject
particular INVESTMENT or to federal income taxes. Sale of property by a seller who
project. Instead, taxable income of the simultaneously leases the
corporation is passed through to
 property back from the of the AMERICAN INSTITUTE OF Financial and informational
purchaser. CERTIFIED PUBLIC DISCLOSURES required by
ACCOUNTANTS (AICPA). the SEC in order to comply with
  certain sections of the Securities
Sales Discount   Act of 1933 and the Securities
Savings Bond and Exchange Act of 1934. Some
A discount that is given to a of the more common filings that
buyer for early payment for U.S. government BOND issued publicly owned companies must
a sale made on CREDIT. in face value denominations submit are the FORM 10-
ranging from $50 to $10,000. K, FORM 10-Q and FORM 8-K.
 
Sales Tax    
Seasonality SEC Registration Statement
A TAX that is levied by a state or
city government on the Variations in business or DISCLOSURE document that
retail sale of goods and services. economic activity that recur must be filed with the SEC in
with regularity as the result of connection with a public
  changes in climate, holidays, and offering of SECURITIES, unless
Salvage Value vacations. the offering is exempt.

Selling price assigned to    

retired FIXED SEC Secondary Market
ASSETS or merchandise unsalabl
e through usual channels. Agency authorized by the United EXCHANGES and OVER-THE-
States Congress to regulate the COUNTER markets where
  financial reporting practices of securities are bought and sold
SAS most public corporations. subsequent to original issuance,
which took place in the primary
Statements issued by   MARKET.
the Accounting Standards Board SEC Filings
  Agency authorized by the United SECURITIES and DEBT SECURIT
Secured Bond States Congress to regulate the IES.
financial reporting practices of
A BOND that gives the most public corporations.  
bondholders a pledge of Security Interest
certain company assets as a  
guarantee of repayment. Securities Industry Association Legal interest of one person in
(SIA) the property of another to
  assure performance of a second
Secured Debt Trade group that represents person under a contract.
broker-dealers.
DEBT guaranteed by the pledge  
of assets or other COLLATERAL.   Self Employment Tax
Securitization
  Most individuals that are in
Securities and Commodities Source of financing whereby an business for themselves, such as
Exchanges entity's ASSETS SOLE PROPRIETORS, PARTNERS
(typically mortgage loans, lease  or independent contractor, are
Organized, obligations or other types of subject to self employment
national EXCHANGES where RECEIVABLES) are placed in a taxes. The taxes provide
securities, options, and futures special purpose vehicle that coverage for the self employed
contracts are traded by issues SECURITIES collateralized individual for social
members for their own accounts by such assets. security (OASDI) and Medicare
and for the accounts of benefits (HI) similar to the taxes
customers.   withheld by employers from
Security wages it pays the employees.
 
Securities and Exchange Any kind of transferable  
Commission (SEC) certificate of ownership Sell Out
including EQUITY
 LIQUIDATION of PENSION plan in which both the and the receipt or payment
a MARGIN ACCOUNT by a employee and the employer of cash.
broker after a margin call has contribute to an INDIVIDUAL
failed to produce RETIREMENT ACCOUNT (IRA).  
additional EQUITY to bring the SFAS
margin to the required level.  
Separate Entity Statements issued by
  the FINANCIAL ACCOUNTING
Selling, General, and Administrative A business that is treated as STANDARDS BOARD (FASB).
(SG&A) Expenses distinct from its creditors,
customers, and owners.  
Grouping of expenses reported Share
on a  
company’s PROFIT and LOSS sta Serial Bond Unit of EQUITY in
tement between COST OF a CORPORATION.
GOODS BOND ISSUE, usually of a
SOLDand INCOME deductions. municipality, with various
maturity dates scheduled at Shareholder
  regular intervals until the entire
Sensitivity Analysis issue is retired. Owner of one or more shares of
stock in a CORPORATION.
Study measuring the effect of a  
change in a variable on Settlement Method  
the RISK or PROFITABILITY of Shares Authorized
an INVESTMENT. Method of ACCOUNTING for
SECURITIES whereby Number of shares of stock
transactions are recorded on the provided for in the articles
SEP Plan date the securities settle by the of INCORPORATION of
delivery or receipt of securities a COMPANY.
    For TAX purposes,
Shares Outstanding Short Sale the PROFIT or LOSS realized
from the sale of securities or
The number of shares in Sale of an item before it is other capital assets held six
a COMPANY that have been purchased. A person entering months or less.
issued and remain in circulation. into a short sale believes the
price of the item will decline  
  between the date of the short Short-Term Investment
Short Bond sale and the date he or she must
purchase the item to deliver the The temporary INVESTMENT of
BOND with a short MATURITY; a item under the terms of the excess CASH, intended to be held
somewhat subjective concept, short sale. until needed to pay
but generally meaning two years current OBLIGATIONS.
or less.
Short-Term  
  SIA
Short Coupon Current; ordinarily due within
one year. Trade group that represents
BOND INTEREST payment broker-dealers.
covering less than the  
conventional six-month period. Short-Term Debt  
Significant Accounts
  All DEBT obligations coming due
Short Interest within one year; show on An account is significant if there
a balance sheet as CURRENT is more than a remote likelihood
Total amount of shares of stock LIABILITIES. that the account could contain
that have been sold short and misstatements that individually
have not yet been repurchased   or when aggregated with others,
to close out short positions. Short-Term Gain or Loss could have a material effect on
the financial statements,
 considering the risks of both 1. significant matters; a SIMPLE Plan (Savings
overstatement and 2. results of auditing procedures incentive match plan for
understatement. indicating a need for significant employees) if it has fewer than
modification of planned auditing 100 employees that received at
  procedures; least $5,000 in compensation in
Significant Deficiency 3. audit adjustments; the preceding year.
4. disagreements among
A control deficiency or members of the engagement  
combination of control team; Simple Trust
deficiencies, that adversely 5. circumstances that cause
affects the company's ability to difficulty in applying auditing This type of TRUST is required
initiate, authorize, record, procedures; to distribute all
process or report external 6. significant changes in the its income currently, whether or
financial data reliably in assessed level of AUDIT RISK; not the TRUSTEE actually does
accordance with GAAP such that 7. matters that could result in so, and it has no provision in the
there is more than a remote modification of the AUDITORS' trust instrument for charitable
likelihood that a misstatement of REPORT. contributions. It is to be
the company's annual or interim distinguished from a COMPLEX
financial statements that is more   TRUST. A trust may be a simple
than inconsequential will not be Simple Interest trust in one year and a complex
prevented or detected. trust in another year. In the year
INTEREST calculation based in which the trust distributes its
  only on the corpus, it loses its classification
Significant Findings or Issues original PRINCIPAL amount. as a simple trust.

Substantive matters that are    

important to the procedures Simple Plans Simplified Employee Pension (SEP)
performed, evidence obtained, Plan
or conclusions reached and An employer may adopt a
include but are not limited to: simplified retirement plan called
 PENSION plan in which both the Money accumulated on a regular  
employee and the employer basis in a separate Sole Proprietorship
contribute to an INDIVIDUAL custodial ACCOUNT that is used
RETIREMENT ACCOUNT (IRA). to redeem DEBT securities See Proprietorship.
or PREFERRED STOCK issues.
   
Single Audit Act   Solvency
Small Business Stock
The Single Audit Act of 1984 and State of being able to meet
the Single Audit Act Noncorporate investors may maturing OBLIGATIONS as they
Amendments of 1996 establish exclude up to 50 percent of come due.
requirements for audits of the GAIN they realize on the
states, local governments, and disposition of qualified small Solvent
nonprofit organizations that business stock issued after Aug.
administer federal financial 10, 1993, and held for more than Capable of paying one’s
assistance programs above a five years. The amount of gain financial obligations.
certain threshold. eligible for the 50 percent
exclusion is subject to per-  
  issuer limits. In order to qualify SPDA
Single-Premium Deferred Annuity for the EXCLUSION,
(SPDA) the CORPORATIONissuing the TAX-deferred INVESTMENT simi
stock must be a C Corporation lar to an INDIVIDUAL
TAX-deferred INVESTMENT simi (but excluding RETIREMENT ACCOUNT (IRA),
lar to an INDIVIDUAL certain investment corporations without many of the IRA
RETIREMENT ACCOUNT (IRA), ) and it must use at least 80 restrictions.
without many of the IRA percent of its assets in active
restrictions. conduct of one or more
 
qualified trade or businesses. In
Special Assessment
  addition, its gross assets cannot
Sinking Fund exceed $50 million.
 Charge made by a local prescribed forms or schedules Assumption of RISK in
government for the cost of that require a prescribed form anticipation of gain but
an improvement or service. It is of auditor's reports. recognizing a higher than
usually levied on those who will average possibility of LOSS.
benefit from the service.  
Specialist  
  Spinoff
Special Report Member of a stock
exchange who maintains a fair Transfer of all, or a portion of,
A term applied to AUDITORS' and orderly MARKET in one or a subsidiary's stock or other
REPORTS issued in connection more securities. ASSETS to the stockholders of
with various types of financial its PARENT COMPANYon a PRO
presentations,   RATA basis.
including: FINANCIAL Specialized Mutual Fund
STATEMENTS that are prepared  
in conformity with a Fund that limits its investments Split Offering
comprehensive basis to a particular sector of the
of accountingother than marketplace. New MUNICIPAL BOND ISSUE,
generally accepted accounting part of which is represented by
principles. Specified elements,   serial bonds and part
accounts or items of a financial Specific Identification Method by TERM MATURITYbonds.
statement. Compliance with
aspects of contractual A way of pricing the cost  
agreements or regulatory of INVENTORY as coming from a Spot Market
requirements related to audited specific purchase.
financial statements. Financial MARKET for buying and
presentations to comply with selling COMMODITIES or
 
contractual agreements or financial instruments for
Speculation
regulatory provisions. Financial immediate delivery and
information presented in payment based on the
 settlement conventions of the A widely known and accepted deduction format, but the
particular market. measurement or weight used as amounts and computations
a basis for a system of differ from the federal and from
Spread measurements. state to state. Certain taxpayers
may not be entitled to use the
Difference between two prices,   standard deduction. An example
usually a buying and selling Standard Cost of this would be a married filing
price. separate taxpayer. If one
Realistic costs for direct taxpayer itemizes then the other
  materials, direct labor, and is required to by law even if the
Spreadsheet factory overhead that have been married filing separate taxpayer
determined before they occur. is unknowing of what is included
An ACCOUNTING or BOOKKEEPI on the spouses separate return.
NG application for use on a   A reason for this might be the
computer. Standard Deduction prevention of pooling and
duplication of deductions.
  Individual taxpayers who do not
SSARS itemize their deductions are  
entitled to a standard Standard Deviation
Statements issued by deduction amount by which to
the AMERICAN INSTITUTE OF reduce ADJUSTED GROSS Statistical measure of the degree
CERTIFIED PUBLIC INCOME in arriving at taxable to which an individual value in a
ACCOUNTANTS (AICPA) that income. The amount of probability distribution tends to
specifically relate to REVIEWS the standard deduction varies by vary from the mean of the
and COMPILATIONS. the type of the taxpayer and distribution.
changes each year. A schedule of
  standard deductions is easily  
Standard found in the instructions for the Start-Up Costs
federal form 1040. Each state
may also use a standard
 (1) Costs, (GAAP) required as part of a  
excluding acquisition costs, complete set of financial Statement of Financial Condition
incurred to bring a statements prepared in
new unit into production. (2) conformity with . It Basic FINANCIAL STATEMENT,
Costs incurred to begin a categorizes net cash provided or usually accompanied by
business. used during a period as appropriate DISCLOSURES that
operating, investing and describe the basis of
  financing activities, and ACCOUNTING used in its
Stated Value reconciles beginning and ending preparation and presentation as
cash and cash equivalents. of a specified date, the entity's
Per share amount set by ASSETS, LIABILITIES and
the BOARD OF DIRECTORS to be   the EQUITY of its owners. Also
placed in the CAPITAL Statement of Cost of Goods known as BALANCE SHEET.
STOCK account upon issuance Manufactured
of NO-PAR VALUE.  
A Statement of Owner’s Equity
  formal STATEMENT summarizin
Statement g the flow of all manufacturing The financial STATEMENT that
costs incurred during shows how and why
Summary for customers of the an accounting period. an OWNER’S EQUITY, or
transactions that occurred over capital, ACCOUNT has changed
the preceding month.   over s specific financial PERIOD.
Statement of Financial Accounting
  Standards (SFAS)  
Statement of Cash Flows Statements on Auditing Standards
Statements issued by (SAS)
One of the basic FINANCIAL the FINANCIAL ACCOUNTING
STATEMENTS that STANDARDS BOARD (FASB). Statements issued by
isGENERALLY ACCEPTED the Accounting Standards Board
ACCOUNTING PRINCIPLES of the AMERICAN INSTITUTE OF
 CERTIFIED PUBLIC Generally, the basis of property  
ACCOUNTANTS (AICPA). acquired by Stock Market
INHERITENCE, BEQUEST or
  device from a DECENDANT is General term referring to the
Statements on Standards for the FAIR MARKET VALUE of the organized trading of securities
Accounting and Review Services property on the date of the through the
(SSARS)  decendant's death. Thus if the various EXCHANGES and
fair market value is more than the OVER-THE-COUNTER MARK
Statements issued by the decedent's basis, a taxpayers ET.
the AMERICAN INSTITUTE OF basis in the property received is
CERTIFIED PUBLIC stepped-up.
ACCOUNTANTS (AICPA) that Stock Options
specifically relate to REVIEWS  
and COMPILATIONS. Stock Compensation Plan Right to purchase or sell a
specified number of shares of
  FRINGE BENEFIT that gives stock at specified prices and
Statute of Limitations  employees the option to times.
purchase the employer's stock at
This sets out the period within a specified price during a 1) Terminology
which actions may be brought specified period.
upon claims or within which a) Grant date - The date at
rights may be enforced. As it   which an employer and an
pertains to tax returns, Stock Exchange employee reach a mutual
the statute of limitations is understanding of the key
generally three years from the Organized marketplace in which terms and conditions of a
date a return is due or filed. stocks, COMMON share-based payment
STOCK equivalents, and bonds award. The employer
  are traded by members of the becomes contingently
Stepped Up Basis exchange, acting both as agents obligated on the grant
and principals. date
to issue equity instrument be adversely affected by, the market price on the
s or transfer assets to an subsequent changes in the grant date
employee who renders price of the employer’s
the requisite service. equity shares. e) Out of the Money
Awards made under an option – Option granted
arrangement that is b) Measurement Date – with an exercise price
subject The date at which the above the market price.
to shareholder approval equity share price and
are not deemed to be other pertinent factors, f) Backdating
granted until that such as expectedvolatility,
approval is obtained that enter into i) Exercise price is
unless approval is measurement of the total based on a lower
essentially a formality (or recognized amount of share price prior to
perfunctory), for example, compensation cost for an the option grant
if management and the award of share-based date. The practice
members of the board of payment are fixed of marking a
directors control enough document with a
votes to approve the c) Fair value - The amount date that precedes
arrangement. Similarly, at which an asset the actual date.
individual awards that are (or liability) could be ii) Example –
subject to approval by the bought (or incurred) or Option is approved
board of directors, sold (or settled) in a by the board
management, or both are current transaction betwe permits the stock to
not deemed to be granted en willing parties, that is, be priced based
until all such approvals other than in a forced upon the lowest
are obtained. The grant or liquidation sale. price in the past 30
date for an award of days- permits
equity instruments is the d) In the Money option - options to be in the
date that an employee Option granted with an money when
begins to benefit from, or exercise price below issued. Options are
suppose to be d in upon
issued at option recogn fair
price that is neutral ition of value
at time of issuance. compe at
iii) May not be nsatio grant
illegal if n expe date.
nse in and
(1) Clearly earnin compe
communicate gs. If nsatio
d to option n is
shareholders s were recogn
(2) No neutral ized it
documents or out the
forged of the earnin
(3) Reflected money gsstate
in earnings of then. ment
the company no
compe g) Spring loading - Timing
(a) If nsatio of option grants to take
under n place before good news or
A PB would after bad news is released
25 – be
the recogn i) Concerns about
grantin ized insider trading
g of in (b) If
the under h) Forward loading –
money 123R Term used for setting the
option expens option grant date to occur
s e is after predicted fall in
resulte based stock price or before
predicted stock price that have an b) SEC reporting
increase exercise price that implications
is less than fair
i) Terms might value on the date of i) Potentially
involve option to be grant. inaccurate
issued with price to reporting of
be determined 2) Accounting and Tax Ramificat executive
based upon the ions compensation
lowest price as of in proxy statements
the issue date or for a) Accounting and annual reports
the next 30 days ramifications ii) Potential
after the issuance. violation of
Grant date does not i) Restatement securities and Law
occur until the ii) Unable to file on for executive
conclusion of the 30 timely basis while oficiers and
day periodwhen the go back and directors with
price is known. To determine what Section 16 (a) of the
determine the price periods are effected Securities and
the company needs iii) Calls into exchange Act of
to look back at the questions 1934. required to
stock price for the company’s internal report on form 4
last 30 days to controls and iii) Potential false
determine what the governance or misleading
exercise price iv) Will be unable disclosures about
should be. This is to file shelf the
another version of registration company’s stock
backdating. v) May be delisted option plan in
from exchange periodic reports
i) Discounted filed with the SEC –
options – options Failure to disclose
 the practice of i) Exercise price required to
backdating may effects capital gains select a fixed
violate securities of the individual exercise date
and laws against and effects no later than
false or misleading compensation December
disclosures expense used 31, 2006 or
iv) Potential false by corporation for be subject to
Section 302 calculating immediate
certifications company’s taxation
– Principal and compensation on vesting , a
financial executives expense for tax 20
are required to sign purposes, percent penal
certifications in ii) Tax ty and
quarterly and ramifications – an interest as
annual reports company sessment.
certifying that (2) May
among other things (1) cause
that the report filed Discounted the loss of tax
with the SEC does options that deductions
not include any become under
false statements of vested on or Section 162
amaterial fact or after January (m), the
state material facts 1, 2005 are deduction
necessary in order subject to that public
to make the non companies
disclosures not qualifying take for
misleading. deferred compensatio
compensatio n to chief
c) Tax Ramifications n rules - executive
Holder is officer and
next four stock options i) Effective for
highest do not years after
compensated qualify for December 15, 2006
officers is Incentive ii) New Disclosures
limited to $1 Stock option mandated
million each. (ISO)
The treatment. (1) Fairvalue
deduction for (ISO there is of options on
stock options no payroll grant date
in not usually tax (2) Value of
limited. or withholdin grant per
However, g requiremen 123R
discounted ts for ISO’s) – (3) Closing
options do If company price market
not qualify as mistakenly price on the
performance treats date of grant
based backdated if it is
compensatio stock as an greather than
n and ISO the the excericise
therefore the company my price of the
deduction fail to meet award
that the payroll tax (4) The date
company and income t the
would get ax compensatio
may be withholding n committee
partially or requirements or board took
completely . action to
lost. In grant an
addition d) New Rules SEC award if
discounted theat date is
 different stock in the corporation for a  
than the stated price that is often Stockholders’ Equity
actual grant substantially less than the FAIR
date. MARKET VALUE of the stock. The OWNER'S EQUITY in
(5) Also if the These rights may be exercised a CORPORATION.
exercise by paying the stated price, may
price of an be sold, or may be allowed to  
option grant expire or lapse. Stock rights are Straight-Line Depreciation
differs from generally treated as
the closing stock DIVIDENDS. ACCOUNTING method that
market price reflects an equal amount of wear
per share on   and tear during each period of
the grant Stock Split an ASSET'S useful life. For
date instance, the annual STRAIGHT-
companies Increase in the number of shares LINE DEPRECIATION of a $2,500
must include of a company's COMMON asset expected to last five years
a description STOCK outstanding that result is $500.
of the from the issuance of additional
method for shares proportionally to existing  
determining stockholders without additional Straight-Line Percentage
the exercise capital investment. The PAR
price. VALUE of each share is reduced A percentage used to determine
proportionally. the amount of DEPRECIATION to
  be recorded
Stock Rights   each ACCOUNTING period for
Stockholder the straight-line method.
Stock rights are rights issued to
stockholders of A person who owns shares of  
a CORPORATION that entitle STOCK in a COMPANY. Strike Price
them to purchase new shares of
 Price of a financial instrument at depreciable value if an ASSET is  
which conversion or exercise multiplied by a decreasing Swap
occurs. fraction each year of the asset’s
useful life. Financial contract in which two
  parties agree to
Subsequent Event   exchange net streams of
Surplus payments over a
Material event that occurs after specified period. The payments
the end of Not needed; extra. are usually determined by
the accounting period and applying different indices (e.g.,
before the publication of an   interest rates, foreign
entity'sFINANCIAL Surviving Spouse exchange rates, equityindices) to
STATEMENTS. Such events are a NOTIONAL amount. The term
disclosed in the notes to the This is a person whose husband notional is used
financial statements. or wife died during the tax year. because swap contracts
A surviving spouse may file a generally do not involve
  JOINT RETURN for the year in exchanges of PRINCIPAL.
Subsidiary which the death occurred. In
addition a joint return may be T
COMPANY of which more than filed for the two succeeding tax
50% of the voting shares are years if during that time the  
owned by surviving spouse: T Account 
another CORPORATION, called 1. Remains unmarried; and
the PARENT COMPANY. 2. Maintains as his home a The simplest form of
household that is the principal an ACCOUNT, shaped like the
  place of abode during the entire letter T, in which increases and
Sum-of-the-Years-Digits Method TAX YEAR for a child for whom a decreases in the account can be
dependency exemption may be recorded.
An accelerated method claimed.
of DEPRECIATION in which the
    Various sales taxes and certain
Takeover Tax excise taxes.

The act or an instance of taking Charge levied by a  

control of something, especially governmental unit on income, Tax Credit for the Elderly and
by force. consumption, wealth, or other Disabled 
basis.
  Taxpayers age 65 or older or
Tangible Asset    those under 65 who are retired
Tax Basis with permanent and total
ASSETS having a physical disability are eligible to claim
existence, such as cash, land, Original cost of an ASSET, a credit to reduce the amount of
buildings, machinery, or claims less ACCUMULATED their tax liability. It is designed
on property, investments or DEPRECIATION, that goes into primarily to benefit those
goods in process. the calculation of a GAIN  or individuals who receive small
LOSS for TAX purposes. amounts of retirement INCOME.
  Each taxpayer is allocated an
Target Costing    initial base amount based on his
Tax Court or her filing status determining
A pricing method that (1) the credit. The base amount is
identifies the price at which a The U.S. Tax Court is a legislative then reduced by the amount of
product will be competitive in court functioning to adjudicate nontaxable income, or is phased
the marketplace, (2) identifies controversies between out for taxpayers
the minimum desired PROFIT to taxpayers and the IRS arising whose ADJUSTED GROSS
be made on the product, and (3) out of deficiencies assessed by INCOME exceeds certain levels.
computes a target cost for the the IRS for INCOME, GIFT,
product by subtracting the ESTATE, windfall profit and  
desired profit from the certain EXCISE TAXES. It has no Tax Lien 
competitive MARKET PRICE. jurisdiction over other taxes
such as employment taxes.
 ENCUMBRANCE placed on   number, the IRS will assign you
property as security for unpaid Taxable Income a TIN. A federal or employer ID
taxes. number is assigned to other
Taxable income is generally types of entities and will use
  equal to a taxpayer's ADJUSTED that as their TIN.
Tax Shelter  GROSS INCOME during the TAX
YEAR less any allowable  
Arrangement in which EXEMPTIONS and deductions. Tenancy-in-Common 
allowable tax deductions
or EXCLUSIONS result in   Co-ownership of property. In a
the deferral of tax Taxable Municipal Bond  valid tenancy-in-common, a
on INCOME that would deceased co-owner's title passes
otherwise be payable currently. Taxable DEBT obligation of a to his or her heirs without being
state or local government entity, included in the estate of the
  an outgrowth of the Tax Reform deceased co-owner.
Tax Year Act of 1986.
 
The period used to compute a   Term
taxpayer's TAXABLE Taxpayer Identification Number
INCOME is tax year. It is an (TIN)  Period of time during which the
annual period that is either a conditions of a CONTRACT will
calendar year , FISCAL YEAR or Any individual or other taxable be carried out.
fractional part of a year for entity that is required to file
which the return is made. a return, statement or any other  
document with the IRSmust Term Loan
  indicate his (or its) taxpayer
Taxable Earnings  identification number. For an Loan for a specified time period.
individual, the social
The amount of an employee’s security number is used, and if  
earnings subject to a TAX. you do not have a social security Test
 Criterion used to measure time that is adequate to Information passed by one
compliance with financial ratio determine whether, as of the person to another as a basis for
requirements of indentures and date specified in management's buy or sell action in a SECURITY.
other LOAN agreements. report, the controls necessary
for achieving the objectives of  
  the control criteria are operating Title
Time Value  effectively.
The written evidence, such as a
Price put on the time an investor   deed, that proves legal right of
has to wait until TIN possession or control.
an INVESTMENT matures, as
determined by calculating the Any individual or other taxable  
PRESENT VALUE of the entity that is required to file Ton
investment at MATURITY. a return, statement or any other
document with the IRSmust BOND traders’ jargon for $100
  indicate his (or its) taxpayer million.
Time Value of Money  identification number. For an
individual, the social
The concept that CASH security number is used, and if Total Capitalization 
FLOWS of equal dollar amounts you do not have a social security
separated by a time interval number, the IRS will assign you Capital structure of a COMPANY,
have different present values a TIN. A federal or employer ID including LONG-
because of the effect of number is assigned to other TERM DEBT and all forms
compound INTEREST. types of entities and will use of EQUITY.
that as their TIN.
   
Timing of Tests of Control    Total Cost 
Tip
The AUDITOR must perform
tests of controls over a period of
 Sum of FIXED COSTS, semi- A lower-of-cost-or-  
variable costs, and VARIABLE market method of Trademark
COSTS. valuing INVENTORY.
Distinctive name, symbol, motto,
  Total Quality Management  or emblem that identifies a
Total Direct Labor Cost Variance  product, service, or firm.
An organizational environment
The difference between the in which all business functions  
actual LABOR costs incurred and work together to Trader
the standard labor costs for the build quality into the firm’s
good units produced. products or services. Anyone who buys and sells
goods or services for PROFIT;
    a DEALER or merchant.
Total Direct Materials Cost Variance Trade
 
The difference between the Buying or selling goods and Transaction
actual materials costs incurred services among companies,
and the standard costs of those states, or countries, called The act of transacting, especially
items. commerce. a business agreement or
exchange; event or condition
    recognized by an entry in the
Total Gain Trade Date book ACCOUNT.

Excess of the proceeds realized Date when  

on the sale of a SECURITY transaction is Transfer
either INVENTORY or entered into, to be settled on at a
noninventory goods. later date. Transactions To move or cause to go from one
involving financial instruments place, person, or thing to
  are generally accounted for on another.
Total Inventory Method  the trade date.
Transfer Agent  A person may be held LIABLE In this sense a prior owner's
for another taxpayer's basis in the property is
Agent, usually a commercial delinquent taxes if: transferred to the taxpayer.
bank, appointed by a Transferred basis occurs in the
COPORATION, to maintain 1. The transferee received assets following transactions: GIFTS,
records of stock of the transferor-taxpayer; and transfers in trusts, certain
and BOND owners, to cancel 2. The transferor was transfers to controlled
and issue certificates, and to INSOLVENT at the time or was CORPORATIONS, contributions
resolve problems arising from rendered insolvent by that to PARTNERSHIPS and
lost, destroyed, or stolen transfer or related series of LIQUIDATING distributions from
certificates. transfers. a corporation.

  However the insolvency  

Transfer Price  requirement does not apply to Treasurer 
GIFT taxes. The transferee is
Price charged by individual only liable to the extent of the COMPANY officer responsible
entities in a multi-entity value of the property received for the receipt,
COPORATION on transactions from the transferor. Thus, custody, INVESTMENT,
among themselves; also termed transferee liability merely and DISBURSEMENT of funds,
transfer cost. provides a means for the IRS to for borrowings, and, if it is a
recover any assets the public company, for the
  transferor-taxpayer attempts to maintenance of a MARKET for
Transfer Tax transfer to avoid paying taxes. its securities.

Combined federal TAX on gifts    

and estates. Transferred Basis  Treasury 

  A transferred basis is the basis A place where private or public

Transferee Liability  of property in the hands of a funds are controlled.
transferor, donor or GRANTOR.
    A comparison of the total
Treasury Bill  Treasury Stock  of DEBIT and CREDIT balances
in the LEDGER to check that they
Short-term obligation that bears Stock reacquired by the are equal.
no INTEREST and is sold at issuing company. It may be held
a discount. indefinitely, retired, issued upon  
exercise of STOCK OPTIONS or Troubled Debt Restructuring 
  resold.
Treasury Bond  Agreement
  between DEBTOR and CREDITO
Long-term obligation that Trend R which amends the terms of
matures more than five years a DEBT that has little chance of
from issuance and Long-term price or being paid in accordance with its
bears INTEREST. trading volume movements contractual terms. The
either up, down, or sideways, agreement may involve
  which characterize a particular the transfer of ASSETS in full or
Treasury Instruments  MARKET, commodity partial satisfaction of the debt.
or SECURITY.
Direct financial obligations of  
the United States government.   Trust
Trend Analysis
  Ancient legal practice where one
Treasury Note  A type of horizontal analysis in person (the GRANTOR) transfers
which percentage changes are the legal title to an ASSET, called
Intermediate-term obligation calculated for related items for the principal or corpus, to
that matures one to five years several successive years instead another person (the TRUSTEE),
from issuance and of for two years. with specific instructions about
bears INTEREST. how the corpus is to be managed
  and disposed.
Trial Balance 
   enhance interstate reciprocity  
Trustee and practice across state lines Unaudited Financial Statements 
by CPAs, meet the future needs
Person who is given legal title to, of the profession, respond to the FINANCIAL STATEMENTS which
and management authority over, marketplace and protect the have not undergone a
the property placed in a TRUST. public that the profession detailed AUDIT examination by
serves. an independent CERTIFIED
Turnover  PUBLIC ACCOUNTANT (CPA).
 
The number of times a Unamortized Bond Discount   
particular product is sold and Underlying Debt 
restocked during a Difference between the FACE
fixed period of time. VALUE of a BOND and the MUNICIPAL
proceeds received from BOND term referring to
U the sale of the bond by the the debt of government entities
issuing COMPANY, less whatever within the jurisdiction of larger
  portion has been amortized, that government entities and for
UAA is, written off to EXPENSE as which the larger entity has
recorded periodically on partial CREDIT responsibility.
The proposal for a new the PROFIT and LOSS statement.
regulatory framework for the  
public accounting profession   Underlying Security 
which was developed jointly by Unamortized Premiums on
the AMERICAN INSTITUTE OF Investments  SECURITY that must be
CERTIFIED PUBLIC delivered if a put OPTIONS or
ACCOUNTANTS (AICPA) and Unexpensed portion of the call option contract is exercised.
the NATIONAL ASSOCIATION of amount by which the price paid
STATE BOARDS of for a SECURITY exceeded  
ACCOUNTANCY (NASBA). The its PAR VALUE. Undervalued 
new framework is intended to
 SECURITY selling below Payments received for services the AMERICAN INSTITUTE OF
its LIQUIDATION value or which have not yet been CERTIFIED PUBLIC
the MARKET VALUE analysts performed. ACCOUNTANTS (AICPA) and
believe it deserves. the NATIONAL ASSOCIATION of
  STATE BOARDS of
  Unearned Interest  ACCOUNTANCY (NASBA). The
Underwrite  new framework is intended to
INTEREST that has already been enhance interstate reciprocity
To assume the RISK of buying a collected on a LOAN by and practice across state lines by
new ISSUE of securities from the a FINANCIAL INSTITUTION, but CPAs, meet the future needs of
issuing CORPORATION or that cannot yet be counted as the profession, respond to the
government entity and reselling part of earnings because marketplace and protect the
them to the public, either the PRINCIPAL of the loan has public that the profession
directly or through dealers. not been OUTSTANDING long serves.
enough.
   
Unearned Discount    Uniform Capitalization Rules 
Unequal Cash Flows 
ACCOUNT on the books of a These are a set of rules intended
lending institution Cash flow from an ASSET that to be a single comprehensive set
recognizing INTEREST deducted may vary from one year to the of rules to govern the
in advance and which will be next. capitalization, or inclusion
taken into INCOME as earned in INVENTORY of direct
over the life of the LOAN.   and indirect cost of producing,
Uniform Accountancy Act (UAA)  acquiring and holding property.
  Under the rules, taxpayers are
Unearned Income  The proposal for a new required to capitalize the direct
regulatory framework for the costs and an allocable portion of
public accounting profession the indirect costs attributable to
which was developed jointly by real and tangible personal
 property produced or acquired The responsibility of all the  
for resale. The obvious effect of partners in a COMPANY for Unrealized Profit (or Loss) 
the uniform capitalization its DEBT.
rules is that taxpayers may not PROFIT or LOSS that has not
take current deductions for   become actual.
these costs but instead must be Unqualified Opinion 
recovered through  
DEPRECIATION or AMORTIZATI AUDIT opinion not qualified for Unrestricted Funds 
ON. any material scope restrictions
nor departures Resources of a not-for-
  from GENERALLY ACCEPTED profit entity that have no
Unissued Stock   ACCOUNTING PRINCIPLES restrictions as to use or purpose.
(GAAP).
Shares of a corporation’s stock The AUDITOR may issue an unq  
authorized in its charter but not ualified opinion only when there Unsecured Bond 
issued. are no identified material
weaknesses and when there A BOND issued on the
  have been no restrictions on the general CREDIT of a COMPANY.
Unit  scope of the auditor's work. Also
known as CLEAN OPINION.  
Any division Use of Professional Skepticism when
of quantity accepted as   Evaluating the Results of Testing 
a standard of measurement or of Unrealized Loss or Gain on Long-
exchange. Term Investments  The AUDITOR must conduct
the audit of internal control over
  A BALANCE sheet ACCOUNT for financial reporting and the audit
Unlimited Liability  entering increases or decreases of the financial statements with
in the value of long- professional skepticism, which is
term investments. an attitude that includes a
 questioning mind and a critical   Costs that increase or decrease
assessment of audit evidence. Value-Added Tax (VAT)  in direct proportion to the
number of units produced.
V Consumption TAX levied on
the VALUE added to a product at  
  each stage of its manufacturing Variable Overhead 
Valuation  cycle as well as at the time of
purchase by the ultimate The portion of mixed or semi-
The process of determining consumer variable overhead costs that
the PRESENT VALUE of changes proportionately with
a BOND based on the   some measure of activity
current MARKET INTEREST Variable Annuity  or output.
RATE.
Life insurance ANNUITY CONTR  
  ACT whose VALUE fluctuates Variable Rate Loan 
Valuation Allowance  with that of an underlying
securities PORTFOLIO or other Loan whose interest
Method of lowering or raising an INDEXof performance. rate changes over its life in
object's CURRENT VALUE by relation to the level of an index.
adjusting its acquisition cost to  
reflect its market value by use of Variable Costs    
a CONTRA ACCOUNT. Variance
Total costs that change in direct
  proportion to changes in Deviation or difference between
Value productive output or any other an estimated value and the
measure of volume. actual value.
How much money something is
worth.    
Variable Manufacturing Costs  VAT
 Consumption TAX levied on developing new ideas, products, or another illegality exists or
the VALUE added to a product at or processes. because a right of
each stage of its manufacturing rescission applies.
cycle as well as at the time of  
purchase by the ultimate Vertical Analysis   
consumer. Volatile
A technique for
  analyzing FINANCIAL Tending to rapid and extreme
Velocity STATEMENTS that uses fluctuations.
percentages to show the
Rate of spending, or turnover of relationships of each stated item  
money- in other words, how to the total, which is 100 percent Volatility 
many times a dollar is spent in a of the figure in a single
given period of time. statement. Characteristic of a SECURITY,
commodity, or MARKET to rise
    or fall sharply in price within
Vendor Vesting a SHORT-TERM period.

Supplier of goods or services of Point at which certain benefits  

a commercial nature; may be a available to an employee are no Volume
manufacturer, importer, longer contingent on the
or wholesale distributor. employee continuing to work for Total number of stock shares,
the employer. bonds, or COMMODITIES futures
  contracts traded in a
Venture Capital   particular period.
Voidable 
Investment company whose W
primary objective is capital CONTRACT that can be annulled
growth. New ASSETS invested by either party after it is signed  
largely in companies that are because FRAUD, incompetence, Wage
 Payment for services of 1. Confirm the auditor's  
employees at an hourly rate. understanding of the process Wash Sale 
flow of transactions.
  2. Confirm the auditor's A wash sale occurs if stock or
Walkthroughs  understanding of the design of securities are sold at a LOSS and
controls identified for all five the seller acquires substantially
The most effective means for an components of internal control identical stock or SECURITIES
AUDITOR to confirm his over financial reporting, 30 days before or after the sale.
understanding how internal including those related to the Stock or securities for this
control over financial reporting prevention or detection of fraud. purpose includes contracts or
is designed and operates to operations to acquire or sell
evaluate and test its 3. Confirm that the auditor's stock or securities. Losses
effectiveness. It includes making understanding of the process is incurred in a wash sale cannot
inquiries of and observing the complete by determining be deducted. It does not matter
personnel who actually perform whether all points in the process if the total 60 day period begins
the controls; reviewing at which misstatements related in one tax year and ends in
documents that are used in, and to each relevant financial another. However, the
that result from, the application statement assertion that could disallowed loss is not
of the controls; and comparing occur have been identified. permanently lost. Instead, the
supporting documentation to 4. Evaluate the effectiveness of basis in the newly acquired
the accounting records. In a the design of controls. stock or securities is the same
walkthrough, the auditor traces 5. Confirm whether controls basis as of the stock or securities
a transaction from origination have been placed in operation. sold, adjusted by the difference
through the company's in price of the stock or
information systems to the point   securities.
where it is reflected in the Warrant
company's financial reports.  
Walkthroughs provide the Option to purchase additional Weighted-Average-Cost Method 
auditor with evidence to: SECURITIES from the issuer.
 An AVERAGE-COST Able to collect losses on Obligated to bear losses from
METHOD procedure for uncollectible accounts from the uncollectible accounts.
determining the cost of ENDING seller.
INVENTORY under  
the PERIODIC INVENTORY   Work in Progress 
SYSTEM Withholding
INVENTORY account consisting
  Amount withheld or deducted of partially completed goods
Wholesale from employee salaries by the awaiting completion
employer and paid by the and transfer to finished
The sale of goods in large employer, for the employee, to inventory.
quantities, especially to a person the proper authority.
or COMPANY that plans to sell  
them at retail.   Working Capital 
Withholding Allowance 
  Excess of CURRENT ASSETS
Wholesaler Each taxpayer is allowed to over CURRENT LIABILITIES.
claim a withholding allowance,
Middleman or distributor who which exempts a certain amount  
sells mainly to retailers, jobbers, of wages from being subject Working Interest 
other merchants, and industrial, to WITHHOLDING. The
commercial, and institutional allowance is designed to prevent Direct participation
users as distinguished from too much taxes being withheld with UNLIMITED LIABILITY, as
consumers. from a taxpayers wages and a distinguished from
person can compute this by passive LIMITED
  completing form W-4 and PARTNERSHIP shares.
With Recourse submitting it to their employer.
 
  Working Papers 
Without Recourse 
 (1) Records kept by Charging  
the AUDITOR of the procedures an ASSET ACCOUNT to EXPENSE  Yield
applied, the tests performed, the or LOSS.
information obtained, and the Return on an INVESTMENT an
pertinent conclusions reached in Y investor receives
the course of the AUDIT. (2) Any from DIVIDENDS or INTEREST e
records developed by   xpressed as a percentage of the
a CERTIFIED PUBLIC Yellow Book  cost of the SECURITY.
ACCOUNTANT (CPA) during an
audit. Written by the GENERAL  
ACCOUNTABILITY OFFICE, Yield Curve 
  the yellow book sets forth
Worksheet  standards to be followed in Graph showing
auditing the FINANCIAL the TERM structure of interest
A type of working paper used as STATEMENTS of entities that rates by plotting the yields of all
a preliminary step in the receive federal financial bonds of the same quality with
preparation of FINANCIAL assistance. "Yellow Book" is the maturities ranging from the
STATEMENTS. name given to shortest to the longest available.
"Government Auditing
  Standards" issued by the  
Wrap-Around Mortgage   Comptroller General of the Yield to Call 
United States which contains
Second MORTGAGE which standards for audits of YIELD on a BOND assuming the
conveniently expands the total government organizations, bond will be redeemed by
amount of borrowing by the programs, activities and the ISSUER at the first call date
mortgagor without disturbing functions, and of government specified in the
the original mortgage. assistance received by INDENTURE agreement.
contractors, nonprofit
  organizations and other  
Write Off nongovernment organizations. Yield to Maturity 
 Rate of return on a SECURITY to    
its maturity, giving effect to the Zero-Coupon Bond  Zero-Coupon Convertible Security 
stated interest
rate, accrual of discount, or BOND on which the holder ZERO-COUPON
AMORTIZATION of PREMIUM. receives only one payment BOND convertible into the
at maturity which includes COMMON STOCKof the
Z both PRINCIPAL and INTERESTf issuing COMPANY when the
rom issuance to maturity. stock reaches a predetermined
price.