CPE Glossary

Employee benefit plan authorized by Internal Revenue Code section 401(k), whereby an employer establishes an account for each participating employee and each participant elects to deposit a portion of his or her salary into the account. The amount deposited is not subject to income tax. This is the most common type of salary reduction plans.

Complete removal of an amount due, (usually referring to a tax abatement a penalty abatement or an interest abatement within a governing agency).

An approach to product costing that assigns a representative portion of all types of manufacturing costs--direct materials, direct labor, variable factory overhead, and fixed factory overhead--to individual products.

Method that records greater depreciation than straight-line depreciation in the early years and less depreciation than straight-line in the later years of an asset's holding period.

Formal record that represents, in words, money or other unit of measurement, certain resources, claims to such resources, transactions or other events that result in changes to those resources and claims.

Amount owed to a creditor for delivered goods or completed services.

Claim against a debtor for an uncollected amount, generally from a completed transaction of sales or services rendered.

Any reimbursement or other expense allowance arrangement of an employer that meets all of the following requirements (therefore excluding it from gross w-2 EARNED INCOME and tax): (1) it provides reimbursements advances or allowances including per diem and meals, to employees for any job related deductible business expense; (2) employees must be able to substantiate expenses covered in the plan; (3) employee must return any excess advances or payments.

Person skilled in the recording and reporting of financial transactions.

Formal document that communicates an independent accountant's: (1) expression of limited assurance on financial statements as a result of performing inquiry and analytic procedures (review report); (2) results of procedures performed (agreed-upon procedures report); (3) non-expression of opinion or any form of assurance on a presentation in the form of financial statements information that is the representation of management (compilation report); or (4) an opinion on an assertion made by management in accordance with the statements on standards for attestation engagements (attestation report). An accountants' report does not result from the performance of an audit.

Recording and reporting of financial transactions, including the origination of the transaction, its recognition, processing, and summarization in the financial statements.

Change in (1) an accounting principle; (2) an accounting estimate; or (3) the reporting entity that necessitates disclosure and explanation in published financial reports.

The sequence of steps followed in the accounting process to measure business transactions and transform the measurements into financial statements for a specific period.

Senior technical committee of the American Institute of Certified Public Accountants (AICPA), which issued pronouncements on accounting principles from 1959-1973. The APB was replaced by The Financial Accounting Standards Board (FASB).

A financial record of an individual account payable in which entries can be made daily.

Used to measure a company’s ability to collect cash from credit customers. Found by dividing net sales by average net account receivable.

The recognition of an expense or revenue that has occurred but has not yet been recorded.

The attempt to record the financial effects of transactions and other events in the periods in which those transactions or events occur rather than only in the periods in which cash is received or paid by the business, using all the techniques developed by accountants to apply the matching principle.

Method of accounting that recognizes revenue when earned, rather than when collected. Expenses are recognized when incurred rather than when paid.

An expense that has occurred but is not recognized in the accounts.

Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security.

Total depreciation pertaining to an asset or group of assets from the time the assets were placed in services until the date of the financial statement or tax return. This total is the contra account to the related asset account.

Profits that are not paid out as dividends but are instead added to the company’s capital base.

The relationship of a company’s current assets that can be converted into cash to its current liabilities. It is determined by dividing quick assets by current liabilities.

One company taking over controlling interest in another company.

Mathematician employed by an insurance company to calculate premiums, reserves, dividends, and insurance, pension, and annuity rates, using risk factors obtained from experience tables.

Amounts paid for stock in excess of its par value or stated value. Other amounts paid by stockholders and charged to equity accounts other than capital stock.

After a taxpayer's basis in property is determined, it must be adjusted upward to include any additions of capital to the property and reduced by any returns of capital to the taxpayer. Additions might include improvements to the property and subtractions may include depreciation or depletion. A taxpayer's adjusted basis in property is deducted from the amount realized to find the gain or loss on sale or disposition.

Gross income reduced by business and other specified expenses of individual taxpayers. The amount of adjusted gross income affects the extent to which medical expenses, nonbusiness casualty and theft losses and charitable contributions may be deductible. It is also an important figure in the basis of many other individual planning issues as well as a key line item on the IRS form 1040 and required state forms.

A trial balance prepared after all adjusting entries have been recorded and posted to the accounts. Should have equal credit and debit totals.

An accounting entry made into a subsidiary ledger called the General journal to account for a period's changes, omissions or other financial data required to be reported 'in the books' but not usually posted to the journals used for typical period transactions (the cash receipts journal, cash disbursements journal, the payroll journal, sales journal and so on) the entry is posted to the general ledger accounts directly and usually will be numbered itself, dated and have an explanation. Example: AJE# 1 12-31-2003, debit Cash in bank $1,000. Credit interest income $1,000, to record interest income on business bank account at year end, not recorded in cash receipts journal but credited by the bank.

Receipts for shares of foreign company stock maintained by an intermediary indicating ownership.

Expression of an opinion in an auditors' report which states that financial statements do not fairly present the financial position, results of operations and cash flows in conformity with Generally Accepted Accounting Principles (GAAP).

Company, or other organization related through common ownership, common control of management or owners, or through some other control mechanism, such as a long-term lease.

Fund consisting of assets where the holder agrees to remit the assets, income from the assets, or both, to a specified beneficiary in due course or at a specified time.

National professional membership organization that represents practicing certified public accountants (CPAs). The AICPA establishes ethical and auditing standards as well as standards for other services performed by its members. Through committees, it develops guidance for specialized industries. It participates with the Financial Accounting Standards Board (FASB) and the government Accounting Standards Board (GASB) in establishing accounting principles.

To set aside for a specific reason.

A contra-asset account used to reduce Accounts Receivable to the amount that is expected to be collected in cash.

An alternative to formal litigation which includes techniques such as arbitration, mediation, and a non-binding summary jury trial.

Tax imposed to back up the regular income tax imposed on CORPORATION And individuals to assure that taxpayers with economically measured income exceeding certain thresholds pay at least some income tax.

Receipts for shares of foreign company stock maintained by an intermediary indicating ownership.

National professional membership organization that represents practicing Certified Public Accountants (CPAs). The AICPA establishes ethical and auditing standards as well as standards for other services performed by its members. Through committees, it develops guidance for specialized industries. It participates with the Financial Accounting Standards Board (FASB) and the Government Accounting Standards Board (GASB) in establishing accounting principles.

Gradual and periodic reduction of any amount, such as the periodic write down of a bond premium, the cost of an intangible asset or periodic payment of mortgages or other debt.

Tax imposed to back up the regular income tax imposed on corporation and individuals to assure that taxpayers with economically measured income exceeding certain thresholds pay at least some income tax.

Person in a brokerage house, bank trust dept., or mutual fund group who studies a number of companies and makes buy or sell recommendations on the securities of particular companies and industry groups.

Substantive tests of financial information which examine relationships among data as a means of obtaining evidence. Such procedures include: (1) comparison of financial information with information of comparable prior periods; (2) comparison of financial information with anticipated results (e.g., forecasts); (3) study of relationships between elements of financial information that should conform to predictable patterns based on the entity's experience; (4) comparison of financial information with industry norms.

Report to the stockholders of a company which includes the company's annual, audited balance sheet and related statements of earnings, stockholders' or owners' equity and cash flows, as well as other financial and business information.

Series of payments, usually payable at specified time intervals.

Condition that may increase the computation of earnings per share (eps) or decrease loss per share solely because of the inclusion of common stock equivalents, such as stock options, warrants, convertible debt or convertible preferred stock, nomination or selection of the independent auditors.

Senior technical committee of the American Institute of Certified Public Accountants (AICPA), which issued pronouncements on accounting principles from 1959-1973. The APB was replaced by the Financial Accounting Standards Board (FASB).

Increase in the value of an asset such as a stock, bond, commodity, or real estate.

The providing of various accounting or data-processing services by an accountant, the output of which is in the form of financial statements ostensibly to be used solely for internal management purposes.

Explicit or implicit representations by an entity's management that are embodied in financial statement, components and for which the auditor obtains and evaluates evidential matter when forming his or her opinion on the entity's financial statements.

An economic resource that is expected to be of benefit in the future. Probable future economic benefits obtained as a result of past transactions or events. Anything of value to which the firm has a legal claim. Any owned tangible or intangible object having economic value useful to the owner.

A way of measuring how profitably and efficiently assets are being used to produce sales. This is determined by dividing net sales by average total assets.

At a price equal to the face, or nominal, value of a security.

A professional examination of a company’s financial statement by a professional accountant or group to determine that the statement has been presented fairly and prepared using Generally Accepted Accounting Principles (GAAP).

The written record of the basis for the auditor's conclusions that provides the support for the auditor's representations, whether those representations are contained in the auditor's report or otherwise. (May be referred to as work papers or working papers).

Agreement between a CPA firm and its client to perform an audit.

The risk that the auditor may unknowingly fail to modify appropriately his or her opinion on financial statements that are materially misstated.

Application of an audit procedure to less than 100% of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class.

Guidelines to which an auditor adheres. Auditing standards encompass the auditor's professional qualities, as well as his or her judgment in performing an audit and in preparing the auditors' report. Audits conducted by independent certified public accountant (CPA) usually in accordance with Generally Accepted Auditing Standards (GAAS), which consist of standards approved and adopted by the membership of the American Institute Of Certified Public Accountants (AICPA).

Person who audits financial accounts and records kept by others. Includes both public accounting firms registered with the PCAOB and associated persons thereof.

Written communication issued by an independent certified public accountant (CPA) describing the character of his or her work and the degree of responsibility taken. An auditors' report includes a statement that the audit was conducted in accordance with Generally Accepted Auditing Standards (GAAS), which require that the auditor plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, as well as a statement that the auditor believes the audit provides a reasonable basis for his or her opinion.

Maximum number of shares of any class a company may legally create under the terms of its articles of incorporation.

The average number of days required to sell the current inventory of products available for sale. It is found by dividing the number of days in a year by inventory turnover.

A ratio that shows the average length of time it takes a company to receive payment for credit sales.

A way of arriving at the cost of inventory that computes the average cost of all goods available for sale during a fixed period in order to determine the value of inventory.

Payers of interest, dividends and other reportable payments must withhold income tax equal at a rate equal to the fourth lowest rate applicable to single filers if they fail to supply a Federal Employer ID Number (FEIN) or if they fail to certify that they are not subject to it.

All or portion of an account, loan, or note receivable considered uncollectible.

Basic financial statement, usually accompanied by appropriate disclosures that describe the basis of accounting used in its preparation and presentation of a specified date the entity's assets, liabilities and the equity of its owners. Also known as a statement of financial condition.

A process by which an accountant determines whether and why there is a difference between the balance shown on the bank statement and the balance of the cash account in the firm’s general ledger.

A periodic statement, usually monthly, that a bank sends to the holder of a checking account showing the balance in the account at the beginning of the month, during, and at the end of the month.

Legal process, governed by federal statute, whereby the debts of an insolvent person are liquidated after being satisfied to the greatest extent possible by the debtor's assets. During bankruptcy, the debtor's assets are held and managed by a court appointed trustee.

Average market price of a group of securities at a given time.

The quantity of merchandise available for sale at the beginning of an accounting period.

Legal process, governed by federal statute, whereby the debts of an insolvent person are liquidated after being satisfied to the greatest extent possible by the debtor's assets. During bankruptcy, the debtor's assets are held and managed by a court appointed trustee.

Measure of a stock’s relative volatility. The beta is the covariance of a stock in relation to the rest of the stock market.

Bid is the highest price a prospective buyer is prepared to pay at a particular time for a trading unit of a given security; asked is the lowest price acceptable to a prospective seller of the same security. The difference between the prices is the spread.

State laws that regulate the issuance of securities. These laws are coordinated with federal acts.

Individuals responsible for overseeing the affairs of an entity, including the election of its officers. The board of a corporation that issues stock is elected by stockholders.

One type of long-term promissory note, frequently issued to the public as a security regulated under federal securities laws or state blue sky laws. Bonds can either be registered in the owner's name or are issued as bearer instruments.

The amount below par value that a bond sells for.

An additional agreement to a bond issue that defines the rights, privileges, and limitations of bondholders.

A person who owns a bond certificate issued by a government or corporation.

Amount, net or contra account balances, that an asset or liability shows on the balance sheet of a company, also known as carrying value.

The process of recording financial transactions and keeping financial records.

The nontechnical term used by some to describe any cash or other property that is received in exchange of property that would be otherwise nontaxable.

The line in a financial statement that shows net income or loss.

The point at which total revenues equals total costs.

The number of units of a product that must be sold before a company makes enough money to pay for direct and indirect costs of making the product.

Financial plan that serves as an estimate of future cost, revenues or both.

Standard rate multiplied by a level of activity to determine the overhead cost of that activity. Activity measures include LABOR or machine hours.

Combining of two entities. Under the purchase method of accounting, one entity is deemed to acquire another and there is a new basis of accounting for the assets and liabilities of the acquired company. In a pooling of interests, two entities merge through an exchange of common stock and there is no change in the carrying value of the assets or liabilities.

Any division of an organization authorized to operate, within prescribed or otherwise established limitations, under substantial control by its own management.

Purchase of at least a controlling percentage of a company’s stock to take over its assets and operations.

Collection of formal, written rules governing the conduct of a corporation's affairs (such as what officers it will have, what their responsibilities are, and how they are to be chosen). Bylaws are approved by a corporation's stockholders, if a stock corporation, or other owners, if a non-stock corporation.

A benefit plan maintained by an employer for the benefit of the employees under which each participant has the opportunity to select the benefits they desire. Certain minimum choices and nondiscriminatory rules apply.

Loan repayable on demand. Also known as demand loan.

A specified price, usually above face value, at which a corporation may, at its option, buy back and retire bonds before maturity.

Redeemable by the issuer before the scheduled maturity.

Bond which accords an issuer the right to redemption before it is due.

Sophisticated model of the relationship between expected risk and expected return.

Outlay of money to acquire or improve capital assets such as buildings and machinery.

Portion of the total gain recognized on the sale or exchange of a non-inventory asset which is not taxed as ordinary income. Capital gains have historically been taxed at a lower rate than ordinary income.

Funds used by a not-for-profit organization to account for all resources used for the development of a land improvement or building addition or renovation.

Ownership shares of a corporation authorized by its articles of incorporation. The money value assigned to a corporation's issued shares. The balance sheet account with the aggregate amount of the par value or stated value of all stock issued by a corporation.

Convert a schedule of income into a principal amount, called capitalized value, by dividing by a rate of interest.

Expenditure identified with goods or services acquired and measured by the amount of cash paid or the market value of other property, capital stock, or services surrendered; expenditures that are written off during two or more accounting periods.

Interest cost incurred during the time necessary to bring an asset to the condition and location for its intended use and included as part of the historical cost of acquiring the asset.

LEASE recorded as an asset acquisition accompanied by a corresponding liability by the lessee.

Sophisticated model of the relationship between expected risk and expected return.

Amount, net or contra account balances, that an asset or liability shows on the balance sheet of a company. Also known as book value.

Provision of tax law that allows current losses or certain tax credits to be utilized in the tax returns of future periods..

Asset account on a balance sheet representing paper currency and coins, negotiable money orders and checks, bank balances, and certain short-term government securities.

Brokerage firm account whose transactions are settled on a cash basis.

Method of bookkeeping by which revenues and expenditures are recorded when they are received and paid.

Distribution of a corporation’s earnings to stockholders in the form of cash.

Short-term (generally less than three months), highly liquid investments that are convertible to known amounts of cash.

Used to measure the ability of assets to generate operating cash flows.

A way of measuring the ability of sales to generate operating cash flows.

Net of cash receipts and cash disbursements relating to a particular activity during a specified accounting period.

A multicolumn journal used to record sums of cash paid out for expenses.

Ratio of cash and marketable securities to current liabilities.

A multicolumn journal used to record business transactions involving the receipt of cash from other individuals or businesses.

Any loss of an asset due to fire storm act of nature causing asset damage from unexpected or accidental force. Generally it is deductible regardless of whether it is business or personal.

Formal instrument issued by a bank upon the deposit of funds which may not be withdrawn for a specified time period. Typically, an early withdrawal will incur a penalty.

Officer of a firm principally responsible for the activities of a company.

Formal instrument issued by a bank upon the deposit of funds which may not be withdrawn for a specified time period. Typically, an early withdrawal will incur a penalty.

Individual who is trained to develop and implement financial plans for individuals, businesses, and organizations, utilizing knowledge of income and estate tax, investments, risk management analysis and retirement planning. CFPs are certified after completing a series of requirements that include education, experience, ethics and an exam. CFPs are not regulated by a governmental authority.

Internal auditor who has satisfied the examination requirements of the Institute of Internal Auditors.

An accreditation conferred by the Institute of Management Accountants that indicates the designee has passed an examination and attained certain levels of education and experience in the practice of accounting in the private sector.

Accountant who has satisfied the education, experience, and examination requirements of his or her jurisdiction necessary to be certified as a public accountant.

Executive officer who is responsible for handling funds, signing checks, keeping financial records, and financial planning for a corporation.

Individual who is trained to develop and implement financial plans for individuals, businesses, and organizations, utilizing knowledge of income and estate tax, investments, risk management analysis and retirement planning. CFPs are certified after completing a series of requirements that include education, experience, ethics and an exam. CFPs are not regulated by a governmental authority.

Officer of a firm principally responsible for the activities of a company.

Executive officer who is responsible for handling funds, signing checks, keeping financial records, and financial planning for a corporation.

Internal auditor who has satisfied the examination requirements of the Institute of Internal Auditors.

A refund is not automatically mailed if one is due. A taxpayer, whether business or individual, must file a request on a form. It must also be filed within the timeframe allotted or the refund may be lost. An individual can claim a refund back to whatever year it was due but it will only be paid three years back or less.

Audit opinion not qualified for any material scope restrictions or departures from Generally Accepted Accounting Principles (GAAP). Also known as unqualified opinion.

To clear the balances of temporary accounts in order to be ready for the next accounting period.

Mutual Fund with a fixed number of shares outstanding that may be bought or sold. CMO - See Collateralized Mortgage Obligation.

A journal entry made at the end of an accounting period in order to prepare for the next accounting period by clearing the balances of temporary accounts and summarizing the period’s revenues and expenses.

An accreditation conferred by the Institute of Management Accountants that indicates the designee has passed an examination and attained certain levels of education and experience in the practice of accounting in the private sector.

Security whose cash flows equal the difference between the cash flows of the collateralizing assets and the collateralized obligations of a securitized trust. Characteristics of CMO residuals vary greatly and can be extremely complex in nature.

Asset provided to a creditor as security for a loan.

Security whose cash flows equal the difference between the cash flows of the collateralizing assets and the collateralized obligations of a securitized trust. Characteristics of CMO residuals vary greatly and can be extremely complex in nature.

Financial statement comprising the accounts of two or more entities.

Letter provided by a company's independent public accountant to an underwriter when the underwriter has a due diligence responsibility under Section 11 of the Securities Act of 1933 regarding financial information included in an offering statement.

Mixing assets, e.g. customer-owned securities, with those owned by a firm in its proprietary accounts.

A way of borrowing money by using unsecured short-term loans sold directly to the public, usually through professionally managed investments firms.

Percentage of the selling price of the property, paid by the seller.

An alliance of five professional organizations dedicated to disseminating appropriate internal control standards.

Bulk goods such as grains, metals, and foods traded on a commodities exchange or on the spot market.

Capital stock having no preferences generally in terms of dividends, voting rights or distributions.

Organization engaged in business as a proprietorship, partnerships, corporation, or other form of enterprise.

Controls that exist at the company level that have an impact on controls at the process, transaction, or application level.

Financial Statement presentation in which the current amounts and the corresponding amounts for previous periods or dates also are shown.

To pay or make payment for something.

Funds that a borrower must keep on deposit as required by a bank.

Presentation of financial statement data without the accountant’s assurance as to conformity with Generally Accepted Accounting Principles (GAAP).

Agreement between a CPA firm and its client to issue a compilation report.

Non-expression of opinion or any form of assurance on a presentation in the form of financial statements information that is the representation of management.

A trust that is to be distinguished from a simple trust in the fact that it permits accumulation or distribution of current income during the tax year and provides for charitable contributions.

Review of financial records to determine whether the entity is complying with specific procedures or rules.

Interest computed on principal plus interest earned in previous periods.

Change in equity of a business enterprise during a period from transactions and other events and circumstances from sources not shown in the income statement. The period includes all changes in equity except those resulting from investments by owners and distributions to owners.

A financial statement for external reporting that presents only the major categories of information.

Auditor's receipt of a written or oral response from an independent third party verifying the accuracy of information requested.

An investment strategy aimed at long-term capital appreciation with low risk; moderate; cautious; opposite of aggressive behavior; show possible losses but wait for actual profits. Concept which directs the least favorable effect on net income.

Accounting postulate which stipulates that, except as otherwise noted in the financial statement, the same accounting policies and procedures have been followed from period to period by an organization in the preparation and presentation of its financial statements.

Combined financial statements of a parent company and one or more of its subsidiaries as one economic unit

Business combination of two or more entities that occurs when the entities transfer all of their net assets to a new entity created for that purpose.

A taxpayer is considered to have received the income even though the monies are not in hand, it may have been set aside or otherwise made available. An example is interest on a bank account.

Goods bought for personal or household use, as distinguished from capital goods or producer’s goods, which are used to produce other goods.

An event that might happen but that is not likely or planned.

Potential liability arising from a past transaction or a subsequent event.

Portion of a business entity expected to remain active.

Educational programs for Certified Public Accountants (CPAs) to keep informed on changes that occur within the profession. State Boards for Public Accountancy and the American Institute Of Certified Public Accountants (AICPA) each have separate CPE requirements.

Account considered to be an offset to another account. Generally established to reduce the other account to amounts that can be realized or collected.

In general, agreement by which rights or acts are exchanged for lawful consideration.

A deduction from a liability, such as discounts on notes payable, which is a deduction from the balance of notes payable.

The stockholders’ investment in a corporation.

The excess of revenues over all variable costs related to a particular sales volume.

This exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

Measure of risk that errors exceeding a tolerable amount will not be prevented or detected by an entity's internal controls.

Tests directed toward the design or operation of an internal control structure policy or procedure to assess its effectiveness in preventing or detecting material misstatements in a financial report.

Exchange of a convertible security such as a bond into another security such as a fixed number of shares of the issuing corporation’s common stock.

Stock that may be exchanged for other securities of the issuer.

An exclusive right granted by the federal government to the possessor to publish and sell literary, musical, or other artistic materials for a period of the author’s life plus 50 years, including computer programs.

Debt instrument issued by a private corporation, as distinct from one issued by a government agency or a municipality.

The tax that an incorporated business must pay to the federal government and, often, to state and city governments as well.

Form of doing business pursuant to a charter granted by a state or federal government. Corporations typically are characterized by the issuance of freely transferable capital stock, perpetual life, centralized management, and limitation of owners' liability to the amount they invest in the business.

An alliance of five professional organizations dedicated to disseminating appropriate internal control standards.

Procedures used for rationally classifying, recording, and allocating current or predicted costs that relate to a certain product or production process.

Original price of an asset, used in determining capital gain.

Rate of return that a business could earn if it chose another investment with equivalent risk.

Figure representing the cost of buying raw materials and producing finished goods.

Method of revenue recognition which recognizes profits after costs are completely recovered. Generally used only when the total amount of collections is highly uncertain. in tax, the accounting method used to depreciate assets.

Interest rate on a debt security the issuer promises to pay to the holder until maturity, expressed as an annual percentage of face value.

A bond that is usually not registered with the issuing corporation but instead bears interest coupons stating the amount of interest due and the payment date.

A tax exempt trust exclusively for the purpose of paying qualified higher education costs of the trusts designated beneficiary.

Accountant who has satisfied the education, experience, and examination requirements of his or her jurisdiction necessary to be certified as a public accountant.

Educational programs for Certified Public Accountants (CPAs) to keep informed on changes that occur within the profession. State Boards for Public Accountancy and the American Institute Of Certified Public Accountants (AICPA) each have separate CPE requirements.

Entry on the right side of a double-entry bookkeeping system that represents the reduction of an asset or expense or the addition to a liability or revenue.

Arrangement in which one party borrows or takes possession in the present by promising to pay in the future.

Balance remaining after one of a series of bookkeeping entries. This amount represents a liability or income to the entity.

Party that loans money or other assets to another party.

Asset that one can reasonably expect to convert into cash, sell, or consume in operations within a single operating cycle, or within a year if more than one cycle is completed each year.

Obligation whose liquidation is expected to require the use of existing resources classified as current assets, or the creation of other current liabilities.

Used as an indicator of a company’s liquidity and ability to pay short-term debts. This is found by dividing current assets by current liabilities.

1) Value of an asset at the present time as compared with the asset's historical cost. (2) In finance, the amount determined by discounting the future revenue stream of an asset using compound interest principles.

Annual interest on a bond divided by the market price.

Last day the auditors perform fieldwork and the last day of responsibility relating to significant events subsequent to the financial statement date.

Method of accelerated depreciation, approved by the Internal Revenue Service (IRS), permitting twice the rate of annual depreciation as the straight-line depreciation method.

Individual or firm acting as a principal in a securities transaction.

Amounts received under a life insurance contract and paid by reason of the death of the insured. (Although most death benefits are paid at termination of life, certain plans now pay accelerated death benefits while the insured is still alive, i.e.: an AIDS patient might possibly receive accelerated death benefit)

General debt obligation backed only by the integrity of the borrower and documented by an agreement called and indenture.

Stock issued under a contract providing for fixed payments at scheduled intervals and more like preferred stock than a debenture, since their status in liquidation is equity and not debt.

Entry on the left side of a double-entry bookkeeping system that represents the addition of an asset or expense or the reduction to a liability or revenue.

Balance remaining after one or a series of bookkeeping entries. This amount represents an asset or an expense of the entity.

General name for money, notes, bonds, goods or services which represent amounts owed.

Written promise to repay a debt.

Repayment of debt.

Document which is evidence of an obligation or liability.

Fund whose principal or interest is set aside and accumulated to retire debt.

Party owing money or other assets to a creditor.

A way of measuring the relationship of debt financing to equity financing, or the extent to which a company is leveraged.

Individual who has died.

Authorize the payment of dividend on a specified date, an act of the board of directors of a corporation.

An accelerated method of depreciating a tangible long-lived asset by applying a fixed-rate based on some multiple of the straight-line depreciation rate to its carrying value.

To misuse or embezzle funds.

Failure to meet any financial obligation.  Default triggers a creditor's rights and remedies identified in the agreement and under the law.

Annulment of a contract or deed; a clause within a contract or deed that provides for annulment.

The postponement of the date that an expense already paid or incurred, or of revenue already received, is entered in the ledger.

Income received but not earned until all events have occurred. Deferred income is reflected as a liability.

Assets or liabilities that arise from timing or measurement differences between tax and accounting principles.

Bond that pays interest at a later date.

Annuity whose contract provides that payments to the annuitant be postponed until a number of periods has elapsed.

This exists when a control necessary to meet the control objective is missing or an existing control is not properly designed so that even if the control operates as designed, the control objective is not always met.

This exists when a properly designed control does not operate as designed, or when the person performing the control does not possess the necessary authority or qualifications to perform the control effectively.

Financial shortage that occurs when liabilities exceed assets.

A promise to pay participants specified benefits that are determinable and based on such factors as age, years of service, and compensation.

To provide an individual account for each participant and benefits based on items such as amounts contributed to the account by the employer and employee and investment experience. This type includes profit-sharing plans, employee stock ownership plans and 401(k) plans.

Decline in the prices of goods and services.

Loan repayable on demand. Also known as a call loan.

Qualified child care expenses will allow a taxpayer this computed credit against tax. The amounts can be found on the individual forms as the limitations and computation may change each tax year.

Method of computing a deduction to account for a reduction in value of extractable natural resources.

Expense allowance made for wear and tear on an asset over its estimated useful life.

Expense allowance made for wear and tear on an asset over its estimated useful life.

Financial instruments whose value varies with the value of an underlying asset (such as a stock, bond, commodity or currency) or index such as interest rates. Financial instruments whose characteristics and value depend on the characterization of an underlying instrument or asset.

A complete and explicit statement of an economic entity’s financial activities and holdings.

Risk that the auditor will not detect a material misstatement.

These have the objective of detecting errors or fraud that have already occurred that could result in a misstatement of the financial statements.

The labor cost is for specific work that can be easily and economically traced to an end product.

A material that will become part of a finished product and can be easily and economically traced to specific product units.

Portion of overhead costs allocated to manufacturing, by the application of a standard factor termed a burden rate or overhead application rate.

Payment by cash or check.

Statement by an auditor indicating inability to express an opinion on the fairness of the financial statements provided and the reason for the inability. The auditor is required to disclaim depending on the limitation in scope.

Process of divulging accounting information so that the content of financial statements is understood.

Portion of a business that is planned to be or is discontinued.

Reduction from the full amount of a price or debt.

Bond selling below its redemption value.

Rate at which interest is deducted in advance of the issuance, purchasing, selling, or lending of a financial instrument. Also, the rate used to determine the current value, or present value, of an asset or income stream.

Yield on a security sold at a discount.

Present value of future cash estimated to be generated.

Arrangement in which the trustee has the authority to make investment decisions and has control over investments within the framework of the trust instrument.

Personal income remaining after personal taxes and noncommercial government fees have been paid.

Termination of a corporation.

Expense of selling, advertising, and delivery of goods and services.

Payment by a business entity to its owners of items such as cash assets, stocks, or earnings.

Percentage of earnings paid to shareholders in cash.

Distribution of earnings to owners of a corporation in cash, other assets of the corporation, or the corporation's capital stock.

Dividends on cumulative preferred stock that remain unpaid in the year they are due.

A liability for payment of a company’s earnings to its shareholders.

Used to measure the current return to an investor in a stock.

A complete and final set of audit documentation should be assembled for retention as of a date not more than 45 days after the report release date.

The act of taxing corporate earnings twice, once as the net income of the corporation and once as the dividends distributed to stockholders.

Method of accelerated depreciation, approved by the Internal Revenue Service (IRS), permitting twice the rate of annual depreciation as the straight-line depreciation method.

Method of recording financial transactions in which each transaction is entered in two or more accounts and involves two-way, self-balancing posting. Total debits must equal total credits.

Signed, written order by which one party (drawer) instructs another party (drawee) to pay a specified sum to a third party (payee).

Dating of the accountants' or auditors' report when a subsequent event disclosed in the financial statements occurs after completion of the field work but before issuance of the report.

Each governing agency and its forms scheduled reporting and most importantly payments have a required due date. It is this date that if most files timely may result in a penalty, fine, and commence interest charges.

(1) Procedures performed by underwriters in connection with the issuance of a Securities Exchange Commission (SEC) registration statement. These procedures involve questions concerning the company and its business, products, competitive position, recent financial and other developments and prospects. Also, performed by others in connection with acquisitions and other transactions. (2) Requirement found in ethical codes that the person governed by the ethical rules exercise professional care in conducting his or her activities.

Auction system in which the price of an item is gradually lowered until it meets a responsive bid and is sold.

Wages, salaries, professional fees, and other amounts received as compensation for services rendered.

A refundable tax credit for eligible low income workers, subject to computations based on qualifying children and phase in and phase out income levels.

Measure of performance calculated by dividing the net earnings of a company by the average number of shares outstanding during a period.

Relationship of Earnings Per Share (EPS) to current stock price.

Use of computer analysis and modeling techniques to describe in mathematical terms the relationship between key economic forces such as labor, capital, interest rates, and government policies, the test the effects of changes in economic scenarios.

They may be viewed in terms of: (1) business output (or sales volume), (2) value added (or gross regional product), (3) wealth (including property values), (4) personal income (including wages), or (5) jobs. If there is an economic benefit or burden that corresponds to an allocation, the partner to whom the allocation is made must receive the economic benefit or burden. Economic impacts are effects on the level of economic activity in a given area.

The rate of change in the gross national product, as expressed in an annual percentage.

The study of the ways goods and services are produced, transported, sold, and used.

A way of amortizing bond discounts or premiums by applying a constant interest rate to the carrying value of the bonds at the beginning of each interest period.

The rate of interest actually paid or earned.

Total income taxes expressed as a percentage of net income before taxes.

A refundable tax credit for eligible low income workers, subject to computations based on qualifying children and phase in and phase out income levels.

Assists the Financial Accounting Standards Board (FASB) and provides guidance on early identification of emerging issues affecting financial reporting and problems in implementing authoritative pronouncements.

Assists the Financial Accounting Standards Board (FASB) and provides guidance on early identification of emerging issues affecting financial reporting and problems in implementing authoritative pronouncements.

Compensation arrangement, generally in writing, used by employers in addition to salary or wages. Some plans such as group term life insurance, medical insurance and qualified retirement plans are treated favorably under the tax law. Most common qualified retirement plans are: (1) defined benefit plans - a promise to pay participants specified benefits that are determinable and based on such factors as age, years of service, and compensation; or (2) defined contribution plans - provide an individual account for each participant and benefits based on items such as amounts contributed to the account by the employer and employee and investment experience. This type includes profit-sharing plans, employee stock ownership plans and 401(k) plans.

Stock bonus plan of an employer that acquires securities issued by the plan sponsor.

(1) Mortgage or other lien on the entity's assets; (2) Anticipated expenditure; (3) Uncompleted or undelivered portion of a purchase commitment.

Merchandise on hand at the end of an accounting period

The process by which the payee transfers ownership of a check to a bank or another party by writing his or her name on the back of it.

A document whereby the auditor identifies all significant findings or issues. The document should be as specific as necessary in the circumstances for a reviewer to gain a thorough understanding of the significant findings or issues.

Person who takes on the risks of starting a new business.

Measure of performance calculated by dividing the net earnings of a company by the average number of shares outstanding during a period.

Price when the supply of goods in a particular market matches demand.

Residual interest in the assets of an entity that remains after deducting its liabilities. Also, the amount of a business' total assets less total liabilities. Also, the third section of a balance sheet, the other two being assets and liabilities.

Account in the equity section of the balance sheet. Includes capital stock, additional paid in capital and retained earnings.

Raising the money by issuing shares of common stock or preferred stock.

Investors cost basis is adjusted up or down (in proportion to the % of stock ownership) as the investee's retained earnings fluctuation; used for long-term investments in equity securities of affiliate where holder can exert significant influence; 20% ownership or greater is arbitrarily presumed to have significant influence over the investee.

Capital stock and other securities that represent ownership shares, or the legal rights to purchase or acquire capital stock.

Act that departs from what should be done; imprudent deviation, unintentional mistake or omission.

Money or property put into the custody of a third party for delivery to a grantee, only after fulfillment of specified conditions.

Stock bonus plan of an employer that acquires securities issued by the plan sponsor.

Tax on the value of a descendant’s taxable estate, typically defined as the decedent's assets less liabilities and certain expenses which may include funeral and administrative expenses.

Amount of tax liability a taxpayer may expect to pay for the current tax period. Usually paid through quarterly installments.

Activities that involve management judgments or assumptions in formulating account balances in the absence of a precise means of measurement.

Underlying accounting data and other corroborating information that support the financial statements.

Transfer of money, property or services in exchange for any combination of these items.

Tax or duty on the manufacture, sale, or consumption of commodities.

Income item which is excluded from a taxpayer's gross income by the internal revenue code or an administrative action. Common exclusions include gifts, inheritances, and death proceeds paid under a life insurance contract..

Income item which is excluded from a taxpayer's gross income by the internal revenue code or an administrative action. Common exclusions include gifts, inheritances, and death proceeds paid under a life insurance contract. Also known as excluded income.

Person appointed by a will to manage a decedent’s estate.

Organization which is generally exempt from paying federal income tax. Exempt organizations include religious organizations, charitable organizations, social clubs, and others.

Amount of a taxpayer's income that is not subject to tax. All individuals, trusts, and estates qualify for an exemption unless they are claimed as a dependent on another individual's tax return. Exemptions also are granted to taxpayers for their dependents.

Individuals that loose or terminate their residency within the 10 year period immediately preceding the close of a tax year, if the termination or loss is for the sole purpose of avoiding tax.

The difference in perception between the public and the CPA as a result of accounting and audit service.

Payment, either in cash, by assuming a liability, or by surrendering asset.

Something spent on a specific item or for a particular purpose.

Amount, expressed as a percentage of total investment, that shareholders pay for mutual fund operating expenses and management fees.

An auditor that has a reasonable understanding of audit activities and has studied the company's industry as well as the accounting and auditing issues relevant to the industry.

An auditor that has a reasonable understanding of audit activities and has studied the company's industry as well as the accounting and auditing issues relevant to the industry.

Document issued by the American Institute Of Certified Public Accountants (AICPA), Financial Accounting Standards Board (FASB), Governmental Accounting Standards Board (GASB) or other standards setting authorities to invite public comment before a final pronouncement is issued.

Time granted by a taxing authority, such as the Internal Revenue Service (IRS), a state or city, which allows the taxpayer to file tax returns later than the original due date.

Each year the auditor must obtain sufficient evidence about whether the company's internal control over financial reporting, including the controls for all internal control components, is operating effectively.

Reporting to stockholders and the public, as opposed to internal reporting for management's benefit.

To get rid of the liability by payment; to bring to an end.

Events and transactions distinguished by their unusual nature and by the infrequency of their occurrence. Extraordinary items are reported separately, less applicable income taxes, in the entity's statement of income or operations.

Amount due at maturity from a BOND or note.

Selling a receivable at a discounted value to a third party for cash.

Circumstance where a business receives more money from a factor than the value of the receivables, which is a loan against inventory in anticipation of future sales.

Various production-related costs that cannot be practically or conveniently traced to an end product.

Federal law enacted in 1971 giving persons the right to see their credit records at credit reporting bureaus.

Price at which property would change hands between a buyer and a seller without any compulsion to buy or sell, and both having reasonable knowledge of the relevant facts.

Independent, private, non-governmental authority for the establishment of accounting principles in the United States.

Excess of actual revenue over projected revenue, or actual costs over projected costs.

Taxes on net income that must be paid to the federal government by individuals and businesses.

One of the 12 banks that, with their branches, make up the federal reserve system.

System established by the Federal Reserve Act of 1913 to regulate the U.S. monetary and banking system.

Person who is responsible for the administration of property owned by others. Corporate management is a fiduciary with respect to corporate assets which are beneficially owned by the stockholders and creditors. Similarly, a trustee is the fiduciary of a trust and partners owe fiduciary responsibility to each other and to their creditors.

Accounting method of valuing inventory under which the costs of the first goods acquired are the first costs charged to expense. Commonly known as FIFO.

Taxpayers meeting statutory requirements must file various returns on the prescribed forms. And they must be filed timely or the y may not be considered as filed.

The science of the management of money and other financial assets.

Official promulgations, known as statements of financial accounting standards, by the Financial Accounting Standards Board (FASB) which are part of Generally Accepted Accounting Principles (GAAP) in the United States.

Independent, private, non-governmental authority for the establishment of accounting principles in the United States.

Organization engaged in any of the many aspects of finance including commercial banks, thrift institutions, investment banks, securities brokers and dealers, credit unions, investment companies, insurance companies, and real estate investment trusts.

The ability to increase earnings for stockholders by earning more on assets than is paid in interest on debt incurred to finance the assets.

Presentation of financial data including balance sheets, income statements and statements of cash flow, or any supporting statement that is intended to communicate an entity's financial position at a point in time and its results of operations for a period then ended.

The products that have been made and are ready for sale.

An inventory account unique to manufacturing operations.

A business partnership, especially when it is unincorporated.

Accounting method of valuing inventory under which the costs of the first goods acquired are the first costs charged to expense. Commonly known as FIFO.

Period of 12 consecutive months chosen by an entity as its accounting period which may or may not be a calendar year. Fixed Asset - Any tangible asset with a life of more than one year used in an entity's operations.

Investment contract sold by an insurance company that guarantees fixed payments, either for life or for a specified period, to an annuitant.

Tangible long term assets used in the continuing operation of a business that are unlikely to change for a long time.

Costs that remain constant within a defined range of activity, volume, or time period.

In a public offering of new securities, price at which investment bankers in the underwriting syndicate agree to sell the issue to the public.

Attachment to real property that is not intended to be moved and would create damage to the property if it were moved.

Term used when discussing inventories. Inventory cannot be valued lower than the "floor" which is the net realizable value of the inventory less an allowance for a normal profit margin.

Cost of issuing new stocks or bonds.

Indicates the point at which title to goods passes.

A shipping term that means that the seller bears transportation costs to the place of delivery.

A shipping term that means that the buyer bears transportation costs from the point of origin.

Prospective financial statements that are an entity's expected financial position, results of operations, and cash flows.

A balance sheet that projects the financial position of a business for a future period.

An income statement that projects the net income of a business for a future period.

Projecting the cash receipts and the cash payments for a future period.

Seizure of collateral by a creditor when default under a loan agreement occurs.

A corporation which is not organized under the laws of ones territories or states. Taxing of foreign corporations depends on whether the corporation has Nexus or effectively connected income in that state.

Restating foreign currency in equivalent dollars; unrealized gains or losses are postponed and carried in Stockholder's Equity until the foreign operation is substantially liquidated.

Instruments employed in making payments between countries.

A U.S. taxpayer that pays or accrues income tax to a foreign country may elect to credit or deduct these taxes in a determinable us dollar amount. This is usually done on the annual individual tax return and there is a specific form provided for this.

SEC filing which is the annual report due 90 days after the registrant's balance sheet date.

SEC filing which is the quarterly report due 45 days after each of the first three quarter ends of each fiscal year.

SEC filing which is a filing that must be made on the occurrence of an event that is deemed to be of significant importance to security holders.

A form that specifies the number of exemptions claimed by each employee and that gives the employer the authority to withhold money for an employee’s federal income taxes and Federal Insurance Contributions Act (FICA) taxes.

IRC section 512, which imposes a tax on the unrelated business income of various entities that are otherwise tax exempt. The justification for exempting an entity engaged in charitable activities from tax is diminished or absent altogether when that entity's undertakings stray into the commercial realm, thereby potentially competing with taxable businesses.

Legal arrangement whereby the owner of a trade name, franchisor, contracts with a party that wants to use the name on a non-exclusive basis to sell goods or services, franchisee. Frequently, the franchise agreement grants strict supervisory powers to the franchisor over the franchisee which, nevertheless, is an independent business.

State tax which is imposed on a state-chartered corporation for the right to do business under its corporate name.

Willful misrepresentation by one person of a fact inflicting damage on another person.

The amount of cash that remains after deducting the funds a company must commit to continue operating at its planned level.

Indicates the point at which title to goods passes.

Transportation charges on merchandise purchased for resale.

Transportation charges on merchandise sold; an operating expense.

Requirement to disclose all material facts relevant to a transaction.

Method of accounting and presentation whereby assets and liabilities are grouped according to the purpose for which they are to be used. Generally used by government entities and not-for-profits.

Research of such factors as interest rates, gross national product, inflation, unemployment, and inventories as tools to predict the direction of the economy.

Refinancing a debt on or before its maturity; also called refunding and, in certain instances, pre-refunding.

Transferable agreement to deliver or receive during a specific future month a standardized amount of a commodity.

The amount that an investment will be worth at a future date if it is invested at compound interest.

Conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. The highest level of such principles are set by the Financial Accounting Standards Board (FASB).

Standards set by the American Institute Of Certified Public Accountants (AICPA) which concern the auditor's professional qualities and judgment in the performance of his or her audit and in the actual report.

Excess of revenues received over costs relating to a specific transaction.

Accounting and auditing office of the United States government. An independent agency that reviews federal financial transactions and reports directly to Congress.

Group that has authority to establish standards of financial reporting for all units of state and local government.

The simple and most flexible type of journal.

Collection of all asset, liability, owners’ equity, revenue, and expense accounts.

Partnership with no limited partners.

Conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. The highest level of such principles are set by the Financial Accounting Standards Board (FASB).

Standards set by the American Institute of Certified Public Accountants (AICPA) which concern the auditor's professional qualities and judgment in the performance of his or her audit and in the actual report.

A valid transfer of property from one taxpayer to another without consideration or compensation. A gift may be subject to the unified estate and gift transfer tax.

Assumption that a business can remain in operation long enough for all of its current plans to be carried out.

Movement from public ownership to private ownership of a company’s shares either by the company’s repurchase of shares or through purchases by an outside private investor.

Activities that relate to offering a private company's shares to the general investing public including registering with the SEC.

The sum of beginning inventory and the net cost of purchases during a period; the total goods available for sale to customers during an accounting period.

Premium paid in the acquisition of an entity over the fair value of its identifiable tangible and intangible assets less liabilities assumed.

Official legal documents that dictate how an entity is operated. The governing documents of a corporation include articles of incorporation and bylaws; a partnership includes the partnership agreement; a trust includes the trust agreement or trust indenture; and an LLC includes the articles of organization and operating agreement.

Accounting and auditing office of the United States government. An independent agency that reviews federal financial transactions and reports directly to Congress.

Group that has authority to establish standards of financial reporting for all units of state and local government.

Person to whom property is transferred.

(1) Person who transfers property. (2) Person who creates a trust.

Any amount a corporation pays to a shareholder to directly or indirectly buy back its stock.

The beginning point for the determination of income, including income from whatever sources derived.

The difference between net sales and cost of goods sold.

The total amount of sales for cash and on credit accumulated during a specific accounting period.

Legal arrangement involving a promise by one person to perform the obligations of a second person to a third person, in the event the second person fails to perform.

Point in time at which half the principal has been repaid in a mortgage-backed security guaranteed or issued by the Government National Mortgage Association, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation.

An individual entitled to special tax rates that fall midway between single rates and married filing joint rates, if they fit the qualifying profile.

A financial term for a specific type of commodities planning and trading.

A debt security that management intends to hold to its maturity or payment date and whose cash value is not needed until that date.

A common, simple way of separating variable costs from fixed costs.

Bond with a long-term, high-premium, common stock conversion feature and also offering a fairly competitive interest rate.

Original cost of an asset to an entity.

The time in which a taxpayer acquires property and the date on which it is sold.

A maximum allowable credit of $1,500 per student for each of the first 2 years of post-secondary education. It is allowable after all additional requirements are met.

A technique for analyzing financial statements that involves the computation of changes in both dollar amounts and percentages from the previous year to the current year.

An independent private sector body, formed in 1973, with the objective of harmonizing the accounting principles which are used in businesses and other organizations for financial reporting around the world. Its members are 143 professional accounting bodies in 104 countries.

A professional organization made up primarily of management accountants.

Expenditure directed to a particular asset to improve its performance or useful life.

If no interest or an unrealistic amount of interest is charged in a salve involving certain kinds of deferred payments, then the transaction will be treated as if the realistic rate of interest had been used. The difference between the realistic interest and the interest actually used is referred to as imputed interest.

Not paid at the time originally agreed to and overdue.

Inflow of revenue during a period of time.

Gross margin with operating expenses subtracted.

Summary of the effect of revenues and expenses over a period of time.

A temporary account used during the closing process that holds a summary of all revenues and expenses before the net income or loss is transferred to the capital account.

(1) For tax purposes, the concept of basis determines the proper amount of gain to report when an asset is sold. Basis is generally the cost paid for an asset plus the amounts paid to improve the asset less deductions taken against the asset, such as depreciation and amortization. (2) For accounting purposes, a consistent basis of accounting that uses income tax accounting rules while generally Accepted Accounting Principles (GAAP) does not.

If a reasonable person would conclude after considering the possibility of further undetected misstatements that the misstatement either individually or when aggregated with other misstatements would clearly be immaterial to the financial statements. If a reasonable person could not reach such a conclusion regarding a particular misstatement, that misstatement is more than inconsequential.

Process by which a company receives a state charter allowing it to operate as a corporation.

Net of cash outflows and inflows attributable to a corporate investment project.

Formal agreement, also called a deed of trust, between an issuer of bonds and the bondholder covering certain considerations such as form of the bond for example.

This is the private sector standard-setting body governing the independence of auditors from their public company clients. It came about from discussions between the AICPA, other accounting representatives and the SEC.

New York Stock Exchange member who executes orders for other floor brokers who have more volume than they can handle, or for firms whose exchange members are not on the floor.

Statistical composite that measures changes in the economy or in financial markets, often expressed in percentage changes from a base year or from the previous month.

Any cost that cannot be conveniently and economically traced to a specific department; a manufacturing cost that is not easily traced to a specific product and must be assigned using an allocation method.

Labor costs for production-related activities that cannot be connected with or conveniently and economically traced to a specific end product.

Various production-related costs that cannot be practically or conveniently traced to an end product.

Minor materials and other production supplies that cannot be conveniently and economically traced to specific products.

The procedure for converting the income statement from an accrual to a cash basis.

A personal savings plan that allows an individual to make cash contributions per year dependent on the individual's adjusted gross income and participation in an employer's retirement plan. Under a traditional IRA these earnings are not taxable until the time of withdrawal from the plan.

Rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market.

Rate of change in prices.

As distinguished from a bequest or devise, an inheritance is property acquired through laws of descent and distribution from a person who dies without leaving a will. The value of property inherited id excluded from a taxpayers gross income, but if the property inherited produces income it is included in gross income. A taxpayer's basis in inherited property is the fair market value at the time of death.

When a private company goes public for the first time.

A procedure that consists of seeking information, both financial and non-financial, of knowledgeable persons throughout the company. It is used extensively throughout the audit and often is complementary to performing other procedures. Inquiries may range from formal written inquiries to informal oral inquiries.

Corporate affairs that have not yet been made public.

Inability to pay debts when due.

When an entity's liabilities exceed its assets.

Tax accounting method of reporting gain on the sale of an asset exchanged for a receivable. In general, the gain is reported as the note is paid off.

A professional organization made up primarily of management accountants.

A legal document used for a specific purpose, such as paying for goods received.

System whereby individuals and companies that are concerned about potential hazards pay premiums to an insurance company, which reimburses them in the event of loss.

Account at a bank, savings and loan association, credit union, or brokerage firm that belongs to a federal or private insurance organization.

Asset having no physical existence such as trademarks and patents.

Payment for the use or forbearance of money.

A way of measuring the degree of protection that a creditor has from a debtor’s default on interest payments.

An amount of money charged for borrowing money or paid for the use of somebody else’s money.

Dividend declared and paid before annual earnings have been determined, generally quarterly.

Financial statements that report the operations of an entity for less than one year.

Audit performed within an entity by its staff rather than an independent certified public accountant.

Process designed to provide reasonable assurance regarding achievement of various management objectives such as the reliability of financial reports.

A process designed by, or under the supervision of the company's principal executive and principal financial officers or persons performing similar functions and effected by the company's board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: 1. Pertain to the maintenance of records that accurately and fairly reflect the transactions and dispositions of the assets of the company. 2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the company. 3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Method that determines the discount rate at which the present value of the future cash flows will exactly equal investment outlay.

Collection of tax rules of the federal government. Also referred to as Title 26 of the United States Code.

Federal agency that administers the internal revenue code. The IRS is part of the United States Treasury Department.

An independent private sector body, formed in 1973, with the objective of harmonizing the accounting principles which are used in businesses and other organizations for financial reporting around the world. Its members are 143 professional accounting bodies in 104 countries.

Mutual fund that invests in securities markets throughout the world so that if one market is in a slump, money can still be made in others.

Valuation determined by applying data inputs to a valuation theory or model.

Tangible property held for sale, or materials used in a production process to make a product.

Circumstance where loans in excess of accounts receivable are made against inventory in anticipation of future sales. Sometimes used as a synonym for over-advances in factoring.

A ratio used to indicate the number of times a company’s average inventory is sold during an accounting period.

To put money into something such as property, stocks, or a business, in order to earn interest or make a profit.

The practice of putting money into something, such as property, in order to earn interest or make a profit.

Expenditure used to purchase goods or services that could produce a return to the investor.

Firm, acting as underwriter or agent, that serves as intermediary between an issuer of securities and the investing public.

Income from securities and other non-business investments; such as dividends, interest, etc.

This is a component of the general business credit and consists of the following: 1. The energy credit; 2. The rehabilitation credit; and 3. The reforestation credit.

Bill prepared by a seller of goods or services and submitted to the purchaser.

This is a conversion of property where it is in whole or part destroyed, stolen, seized, requisitioned or condemned (or where there is a threat or imminence of requisition or condemnation).

When a private company goes public for the first time.

A personal savings plan that allows an individual to make cash contributions per year dependent on the individual's adjusted gross income and participation in an employer's retirement plan. Under a traditional IRA these earnings are not taxable until the time of withdrawal from the plan.

Federal agency that administers the internal revenue code. The IRS is part of the United States Treasury Department.

This is the private sector standard-setting body governing the independence of auditors from their public company clients. It came about from discussions between the AICPA, other accounting representatives and the SEC.

Stock or bonds sold by a corporation or a government entity at a particular time.

Shares of a corporation, authorized in the corporate charter, which have been issued and are outstanding.

This term means an issuer, the securities of which are registered under Section 12 of the Securities Exchange Act of 1934, or that is required to file reports under Section 15(d) of that Act, or that files or has filed a registration statement with the SEC that has not yet become effective under the Securities Act of 1933 and that it has not withdrawn.

If the IRS believes that collection of tax appears to be in jeopardy (danger of being uncollected), it may immediately assess and collect such tax, bypassing intermediate steps.

A customer order for a specific number of specially designed, made-to-order products.

A tax return filed by married taxpayers or surviving spouses.

When two or more persons or organizations gather capital to provide a product or service, often carried out as a partnership.

Any book containing original entries of daily financial transactions.

A notation in the general journal that records a single transaction.

Debt securities issued by companies with higher-than-normal credit risk. Considered 'non-investment grade', these bonds ordinarily yield a higher interest rate to compensate for the additional risk.

An overall operating philosophy of inventory management in which all resources, including materials, personnel, and facilities, are used only as needed.

Also known as an HR 10, this is a qualified retirement plan for self-employed who do not incorporate their business. If qualifications are met the taxpayer may receive a deduction for contributions made.

For purposes of rules that apply to top heavy plans, a key employee: 1. An officer of the employer earning more than 130,000; 2. An individual who owns more than 5 percent of the employer; 3. An individual who owns more than 1 percent of the employer and compensation greater than 150,000.

Industry of primary importance to a nation’s economy.

Business-owned life insurance contract typically on the lives of principal officers that normally provides for guaranteed death benefits to the company and the accumulation of a cash surrender value.

Writing checks against a bank account with insufficient funds to cover them, hoping that the bank will receive deposits before the checks arrive for clearance.

Physical or mental effort; work.

Doctrine that interference of government in business and economic affairs should be minimal.

Property; real estate.

Accounting method of valuing inventory under which the costs of the last goods acquired are the first costs charged to expense. Commonly known as LIFO.

Reduce the risk in standby commitment, under which the bankers agree to purchase and resell to the public any portion of a stock issue not subscribed to by shareowners who hold rights.

Conveyance of land, buildings, equipment or other assets from one person (lessor) to another (lessee) for a specific period of time for monetary or other consideration, usually in the form of rent.

Price paid by a real estate limited partnership, when acquiring a lease, including legal fees and related expenses.

Property interest a lessee owns in the leased property.

Agreement providing that portions of lease payments may be applied toward the purchase of the property under lease.

Any book of accounts containing the summaries of debit and credit entries.

A complete record of the transactions recorded in each individual account.

Individual or firm that extends money to a borrower with the expectation of being repaid, usually with interest.

Securities borrowed from a broker’s inventory, other margin accounts, or from other brokers, when a customer makes a short sale and the securities must be delivered to the buying customer’s broker.

Person or entity that has the right to use property under the terms of a lease.

Owner of property, the temporary use of which is transferred to another (lessee) under the terms of a lease.

Conditional bank commitment issued on behalf of a customer to pay a third party in accordance with certain terms and conditions. The two primary types are commercial letters of credit and standby letters of credit.

Any letter expressing an intention to take an action, sometimes subject to other action being taken.

The use of borrowed funds to increase the profit from an investment.

Acquisition of a controlling interest in a company in a transaction financed by the issuance of debt instruments by the acquired entity.

Transaction under which the lessor borrows funds to acquire property which is leased to a third party. The property and lease rentals are security for the lessor's indebtedness.

Debts or obligations owed by one entity (debtor) to another entity (creditor) payable in money, goods, or services.

Creditor’s claim against property. For example a mortgage is a lien against a house.

Age to which an average person can be expected to live, as calculated by an actuary.

This allows a credit for 20 percent of qualified tuition and fees paid by the taxpayer with respect to one or more students for any year that the hope scholarship credit is not claimed.

Accounting method of valuing inventory under which the costs of the last goods acquired are the first costs charged to expense.

The reduction of inventory levels at year’s end below beginning-of-the-year levels for businesses using the Last In, First Out (LIFO) inventory method.

A company, usually registered in the United Kingdom, that is organized to protect its owners from financial responsibility.

The obligation of owners of a corporation, who are liable only for the amount of their investment and are not liable for the corporation’s debts.

Form of doing business combining limited liability for all owners (called members) with taxation as a partnership. An LLC is formed by filing articles of organization with an appropriate state official. Rules governing LLCs vary significantly from state to state.

General partnership which, via registration with an appropriate state authority, is able to enshroud all its partners in limited liability. Rules governing LLPs vary significantly from state to state.

Partnership in which one or more partners, but not all, have limited liability to creditors of the partnership.

Cash, cash equivalents, and marketable securities.

Winding up an activity by distributing its assets to the appropriate parties and settling its debts.

Available money on hand to pay bills when they are due and to take care of unexpected needs for cash.

Measure of a firm’s ability to meet maturing short-term obligations.

Limits are imposed on the depreciation deduction a taxpayer may claim on certain listed property as follows: 1. A passenger car; 2. Other property used as transportation; 3. Property used for purposes of entertainment, recreation, or amusement; 4. A computer and peripheral equipment; and 5. Cellular telephone.

A service that CPAs often provide to attorneys - e.g., expert testimony about the value of a business or other asset, forensic accounting (a partner stealing from his other partners, or a spouse understating his income in a matrimonial action). The lawyer hires the CPA to do the investigation and determine the amount of money stolen or understated.

Form of doing business combining limited liability for all owners (called members) with taxation as a partnership. An LLC is formed by filing articles of organization with an appropriate state official. Rules governing LLCs vary significantly from state to state.

General partnership which, via registration with an appropriate state authority, is able to enshroud all its partners in limited liability. Rules governing LLPs vary significantly from state to state.

Transaction wherein an owner of property, called the lender allows another party, the borrower, to use the property.

Amount a lender is willing to loan against collateral.

Bond that matures in more than 10 years.

Holding period of six months or longer, according to the Tax Reform Act of 1984 and applicable in calculating the capital gains tax until 1988.

An asset that has the following characteristics: (1) it has a useful life of more than one year; (2) it is acquired for use in the operation of a business; and (3) it is not intended for resale to customers.

Debt with a maturity of more than one year from the current date.

Subsequent to the Tax Reform Act of 1984 and prior to provisions of the Tax Reform Act of 1986 effective in 1988, a gain on the sale of a capital asset where the holding period was six months or more and the profit was subject to the long-term capital gains tax.

An investment that management plans to hold for more than one year.

A debt that falls due more than one year in the future or beyond the normal operating cycle, or that is to be paid out of noncurrent assets.

Negative counterpart to long-term gain as defined by the same legislation.

Excess of expenditures over revenue for a period or activity. Also, for tax purposes, an excess of basis over the amount realized in a transaction.

The account in which a loss is recorded when a firm sells or trades in an asset and receives an amount less than the book value for that asset.

Valuing assets for financial reporting purposes. Ordinarily, "cost" is the purchase price of the asset and "market" refers to its current replacement cost. Generally Accepted Accounting Principles (GAAP) requires that certain assets (e.g., inventories) be carried at the lower of cost or market.

Single payment to a beneficiary covering the entire amount of an agreement.

Analysis of a nation’s economy as a whole, using such aggregate data as price levels, unemployment, inflation, and industrial production.

Combined fields of policy and administration and the people who provide the decisions and supervision necessary to implement the owner’s business objectives and achieve stability and growth.

Reporting designed to assist management in decision-making, planning, and control. Also known as managerial accounting.

SEC requirement in financial reporting for an explanation by management of significant changes in operations, assets, and liquidity.

Management is required to include in its annual report its assessment of the effectiveness of the company's internal control over financial reporting in addition to its audited financial statements as of the end of the most recent fiscal year.

Reporting designed to assist management in decision-making, planning, and control.

Buying or selling a security to create a false appearance of active trading and thus influence other investors to buy or sell shares.

To make or process (a product), especially by using machines.

Another term for factory overhead costs.

Excess of selling price over the unit cost.

Relationship of gross profits to net sales.

Increase or decrease in the total costs of a business firm as the result of one more or one less unit of output.

Amount of tax imposed on an additional dollar of income.

Amount subtracted from the selling price, when a customer sells securities to a dealer in the over-the-counter market.

Public place where products or services are bought and sold, directly or through intermediaries.

Value of a corporation as determined by the market price of its issued and outstanding common stock.

Numbers representing weighted values of the components that makes up the index.

The rate of interest paid in the market on bonds of similar risk.

Last reported price at which a security was sold on an exchange.

Percentage of industry sales of a particular company or product.

The price investors are willing to pay for a share of stock on the open market.

Stocks and other negotiable instruments which can be easily bought and sold on either listed exchanges or over-the-counter markets.

Moving goods and services from the provider to consumer.

Method of valuing assets that result in adjustment of an asset's carrying amount to its market value.

The amount added to the price of a product by a retailer to arrive at a selling price.

Taxpayers that are married may file a joint return, therefore combining their income and expenses. Individuals will be considered married if: 1. They are living as husband and wife; 2. They are recognized living as common law marriage; or 3. Legally married but separated and living apart but not legally divorced. Marriage is determined as of the last day of the tax year.

A fundamental concept of basic accounting. In any one given accounting period, you should try to match the revenue you are reporting with the expenses it took to generate that revenue in the same time period, or over the periods in which you will be receiving benefits from that expenditure. A simple example is depreciation expense. If you buy a building that will last for many years, you don't write off the cost of that building all at once. Instead, you take depreciation deductions over the building's estimated useful life. Thus, you've 'matched' the expense, or cost, of the building with the benefits it produces, over the course of the years it will be in service.

The substance or substances from which something is made.

A significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Magnitude of an omission or misstatements of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would change or be influenced.

An inventory account made up of the balances of materials, parts, and supplies on hand at a given time.

The time at which payment of a loan or bond becomes due.

Date on which the principal amount of a note, draft, acceptance, bond, or other debt instrument becomes due and payable.

SEC requirement in financial reporting for an explanation by management of significant changes in operations, assets, and liquidity.

Items that can be bought or sold; commercial goods.

The goods on hand at any one time that are available for sale to customers in the regular course of business.

Business combination that occurs when one entity directly acquires the assets and liabilities of one or more entities and no new corporation or entity is created.

An accounting model that is based on the economic theory that profit will be greater when the difference between total revenue and total cost is the greatest.

Study of the behavior of basic economic units such as companies, industries, or households.

Costs that result when both variable costs and fixed costs are charged to the same general ledger account.

Designing and manipulating a mathematical representation of an economic system or corporate financial application so that the effect of changes can be studied and forecast.

A mandatory system of depreciation for income tax purposes, enacted by Congress in 1986.

Definite fixed amounts stated in terms of dollars, either by law or by contract agreement.

The use of an intermediate agent, such as a bank, to disguise the source of money received from illegal activities.

Market for short-term debt instruments.

Control of the production and distribution of a product or service by one firm or a group of firms acting in concert.

Legal instrument evidencing a security interest in assets, usually real estate. mortgages serve as collateral for promissory notes.

Average of security or commodity prices constructed on a period as short as a few days or as long as several years and showing trends for the latest interval.

A modified version of the weighted-average-cost method. it is used to compute the average cost of a perpetual inventory.

Bond issued by a government or public body, the interest on which is typically exempt from federal taxation.

The ability of each partner in a company to act as an agent of the company.

Investment company which generally offers its shares to the general public and invests the proceeds in a diversified portfolio of securities.

Serves as a forum for the 54 State Boards of Accountancy, which administer the uniform CPA examination, license Certified Public Accountants and regulate the practice of public accountancy in the United States.

National Association of Securities Dealers Automated Quotations system, which is owned and operated by the National Association of Securities Dealers; a computerized system that provides brokers and dealers with price quotations for securities traded over-the-counter as well as for many New York Stock Exchange (NYSE) listed securities.

National Association of Securities Dealers Automated Quotations system, which is owned and operated by the National Association of Securities Dealers; a computerized system that provides brokers and dealers with price quotations for securities traded over-the-counter as well as for many New York Stock Exchange (NYSE) listed securities.

Serves as a forum for the 54 State Boards of Accountancy, which administer the uniform CPA examination, license Certified Public Accountants and regulate the practice of public accountancy in the United States.

Takeover of a private company’s assets or operations by a government.

In mutual funds, the MARKET VALUE of a fund share, synonymous with bid price; book value of a company’s different classes of securities, usually stated as net asset value per bond, net asset value per share of preferred stock, and net book value per common share of common stock.

Report issued by an accountant based on limited procedures that states that nothing has come to the accountant's attention to indicate that the financial information is not fairly presented.

The omission to do something which a reasonable man, guided by those ordinary considerations which ordinarily regulate human affairs, would do, or the doing of something which a reasonable and prudent man would not do. Negligence is the failure to use such care as a reasonably prudent and careful person would use under similar circumstances; it is the doing of some act which a person of ordinary prudence would not have done under similar circumstances or failure to do what a person of ordinary prudence would have done under similar circumstances. The term refers only to that legal delinquency which results whenever a man fails to exhibit the care which he ought to exhibit, whether it be slight, ordinary, or great. It is characterized chiefly by inadvertence, thoughtlessness, inattention, and the like, while 'wantonness' or 'recklessness' is characterized by willfulness. The law of negligence is founded on reasonable conduct or reasonable care under all circumstances of particular care. Doctrine of negligence rests on duty of every person to exercise due care in his conduct toward others from which injury may result.

Something that can be sold or transferred to another party in exchange for money or as settlement of an obligation.

Figure remaining after all relevant deductions have been made from the gross amount.

In mutual funds, the market value of a fund share, synonymous with bid price; book value of a company’s different classes of securities, usually stated as net asset value per bond, net asset value per share of preferred stock, and net book value per common share of common stock.

Excess of the value of securities owned, cash, receivables, and other assets over the liabilities of the company.

Difference between current assets and current liabilities; another name for working capital.

Excess or deficit of total revenues and gains compared with total expenses and losses for an accounting period.

In addition to the rental payment, the lessee assumes all property charges such as taxes, insurance, and maintenance.

The difference between expenses and revenues when expenses exceed revenues over a period of time.

Method used in evaluating investments whereby the net present value of all cash outflows and cash inflows is calculated using a given discount rate, usually required rate of return.

A capital investment evaluation method that discounts future cash flows to their present value.

Amount received from the sale or disposition of property, from a loan, or from the sale or issuance of securities after deduction of all costs incurred in the transaction.

Sales at gross invoice amounts less any adjustments for returns, allowances, or discounts taken.

Similar to equity, the excess of assets over liabilities.

Oldest and largest stock exchange in the United States, located at 11 Wall Street in New York City; also known as the Big Board and The Exchange.

Activities that occur only periodically, the data involved are generally not part of the routine flow of transactions.

Preferred stock or bond that cannot be redeemed at the option of the issuer.

An incorporated organization which exists for educational or charitable purposes, and from which its shareholders or trustees do not benefit financially. Also called not-for-profit organization.

A nonrecourse debt (loan) does not allow the lender to pursue anything other than the collateral. For example, if a borrower defaults on a nonrecourse home loan, the bank can only foreclose on the home. The bank generally cannot take further legal action to collect the money owed on the debt.

Any citizen that is not a resident or citizen of the United States. Income of such individuals is subject to taxation if it is effectively connected with a United States trade or business.

A check drawn against an account in which there is not enough money to honor it.

Stock authorized to be issued but for which no par value is set in the articles of incororation. astated value is set by the board of directors on the issuance of this type of stock.

Stock or bond that does not have a specific value indicated.

Written promise to pay a specified amount to a certain entity on demand or on a specified date.

Collective term for written promissory notes that are due in less than one year.

Collective term for written promissory notes that are due in less than one year and are held by the entity to whom payment is promised.

Type of incorporated organization in which no stockholder or trustee shares in profits or losses and which usually exists to accomplish some charitable, humanitarian, or educational purpose.

Value assigned to assets or liabilities that is not based on cost or market (e.g., the value of a service not yet rendered).

Method used in evaluating investments whereby the net present value of all CASH outflows and cash inflows is calculated using a given discount rate, usually required rate of return.

A check drawn against an account in which there is not enough money to honor it.

Oldest and largest stock exchange in the United States, located at 11 Wall Street in New York City; also known as the Big Board and The Exchange.

Emphasizing or expressing the nature of reality as it is apart from personal reflection or feelings; independence of mind.

Any amount which may require payment by an entity at a future time.

The process of becoming out-of-date.

Consistent accounting basis other than Generally Accepted Accounting Principles (GAAP) used for financial reporting. Examples include an income tax basis or a cash basis.

Price at which someone who owns a security offers to sell it.

Price per share at which a new or secondary distribution of securities is offered for sale to the public.

All post-retirement benefits other than pensions, provided by employers to employees.

Mutual fund that does not have a fixed number of shares outstanding, offers new shares to the public, and buys back outstanding shares at market value.

Agreement, usually a written document, that sets out the rules by which a limited liability company (LLC) is to be operated. It is the LLC equivalent of corporate bylaws or a partnership agreement.

Period of time between the acquisition of goods and services involved in the manufacturing process and the final cash realization resulting from sales and subsequent collections.

An expense other than cost of goods sold that is incurred in running a business.

Type of lease, normally involving equipment, whereby the contract is written for considerably less than the life of the equipment and the lesser handles all maintenance and servicing.

The difference between the revenues of a business and the related costs and expenses, excluding income derived from sources other than its regular activities and before income deductions.

Highest price or rate of return an alternative course of action would provide.

Right to buy or sell something at a specified price during a specified time period.

A series of equal payments made at the end of equal intervals of time, with compound interest on these payments.

One of two classes of income (the other being capital gains) taxed under the internal revenue code. Historically, ordinary income is taxed at a higher rate than capital gains.

The act of arranging something in an orderly way.

The costs of organizing a trade or business or for profit activity before it begins active business. A taxpayer may elect to amortize such expenses for a term no less than 60 months. If the election is not made then the expenses are not deductible and may only be recovered when the business ceases operation or is sold.

In accounting, all costs associated with the acquisition of an asset.

Consistent accounting basis other than Generally Accepted Accounting Principles (GAAP) used for financial reporting. Examples include an income tax basis or a cash basis.

All post-retirement benefits other than pensions, provided by employers to employees.

An amount of something produced, especially during a given period of time.

The act or an instance of purchasing essential products or services from another company.

Not settled or paid.

A check that has been written by the drawer and deducted on his or her records but has not reached the bank for payment and is not deducted from the bank balance by the time the bank issues its statement.

Costs of a business that is not directly associated with the production or sale of goods or services.

Standard rate used to calculate the OVERHEAD cost of a given activity. Activity often measured in labor or machine hours.

Sold to customers at retail and without any special restrictions.

The residual interest in the assets of a business entity that remains after deducting the entity’s liabilities.

A ratio that is used as a way of measuring investor confidence in a company and comparing stocks for profitability. It is found by dividing market price per share by Earnings Per Share (EPS).

Portion of the stockholders' equity which was paid in by the stockholders, as opposed to capital arising from profitable operations.

Equal to the nominal or face value of a security.

Amount per share set in the articles of incorporation of a corporation to be entered in the capital stocks account where it is left permanently and signifies a cushion of equity capital for the protection of creditors.

Company that has a controlling interest in the common stock of another.

The partnership capital account is an equity account in the accounting records of a partnership. It contains the initial and subsequent contributions by partners to the partnership, in the form of either cash or the market value of other types of assets. A partner’s capital account equals the fair market value (FMV) of contributions plus allocable share of partnership income less FMV of distributions less allocable share of partnership loss. Partnership liabilities generally are not taken into account in calculating capital account balances.

Relationship between two or more persons based on a written, oral, or implied agreement whereby they agree to carry on a trade or business for profit and share the resulting profits. Unlike a corporation's shareholders, the partnership's general partners are liable for the debts of the partnership.

Loss generated from activities involved in the conduct of a trade or business in which the taxpayer does not materially participate.

Includes income derived from such sources as dividends, interest, royalties, rents, amounts received from personal service contracts, and income received as a beneficiary of an estate or trust.

These dividends are amounts paid by a cooperative to its members and customers based on the quantity or value of business conducted with or for the members during the tax year.

In capital budgeting; the length of time needed to recoup the cost of capital investment.

A way of judging capital investments that bases the decision to invest in capital equipment on the minimum length of time it will take to earn back in cash the amount of the initial investment.

Percentage of a firm’s profits that is paid out to shareholders in the form of dividends.

A private-sector, non-profit corporation, created by the Sarbanes-Oxley Act of 2002, to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports.

Process by which an accounting firm's practice is evaluated for compliance with professional standards. The objective is achieved through the performance of an independent review by one's peers.

The various government codes contain numerous provisions which impose penalties on a taxpayer (any type of taxpayer) for failure to perform a specific act or omitting vital information on a return.

Retirement plan offered by an employer for the benefit of an employee, usually at retirement, through a trustee who controls the plan assets.

An interval of time with a specified length or characterized by certain conditions.

A system for determining inventory on hand by a physical count that is taken at the end of an accounting period.

The recognition that net income for any period less than the life of the business, although tentative, is still a useful estimate of net income for that period.

System that requires a continuous record of all receipts and withdrawals of each item of inventory.

Process for arriving at a comprehensive plan to solve an individual's personal, business, and financial problems and concerns.

Certified public accountant who specializes in personal financial planning and completes a series of requirements that include education, experience, ethics and an exam.

Financial statements prepared for an individual or family to show financial status.

Movable property that is not affixed to the land (real property). Personal property includes tangible items such as cash, cars and computers, as well as intangible items, such as royalties, patents and copyrights.

A small amount of cash that a company keeps on hand to pay for minor expenses in an office.

Certified public accountant who specializes in personal financial planning and completes a series of requirements that include education, experience, ethics and an exam.

Income reported on a tax basis for which no cash or financial benefit is realized.

An actual count of all merchandise on hand at the end of an accounting period.

A building or group of buildings where something is made or processed; factory.

Asset placed in a trust and used as collateral for a debt.

The POB is an independent oversight board, composed of public members, which monitors and evaluates peer reviews conducted by the SEC Practice Section (SECPS) of the AICPA's Division for CPA Firms as well as other activities of the SECPS.

Used to account for the acquisition of another company when the acquiring company exchanges its voting common stock for the voting common stock of the acquired company when certain criteria are met.

Combined holding of more than one stock, bond, commodity, real estate investment, cash equivalent, or other asset by an individual or institutional investor.

A trial balance prepared at the end of an accounting period after all adjusting and closing entries have been posted; a final check on the balance of the ledger.

Pensions, health care, life insurance and other benefits that are provided by an employer to retirees, their dependents, or survivors.

A rate that is used as a way of estimating and assigning overhead costs to products or jobs for each department or operating unit before the end of an accounting period.

Right giving existing stockholders the opportunity to purchase shares of a new issue before it is offered to others.

Type of capital stock that carries certain preferences over common stock, such as a prior claim on dividends and assets.

(1) Excess amount paid for a bond over its face amount. (2) In insurance, the cost of specified coverage for a designated period of time.

Bond with a selling price above face or redemption value.

Agreement between a future husband and wife that details how the couple’s financial affairs are to be handled both during the marriage and in the event of divorce.

Cost incurred to acquire economically useful goods or services that are expected to be consumed in the revenue-earning process within the operating cycle.

Current value of a given future cash flow stream, discounted at a given rate.

These have the objective of preventing errors or fraud from occurring in the first place that could result in a misstatement of the financial statements.

High/low range in which a stock has traded over a particular period of time.

A ratio that is used as a way of measuring investor confidence in a company and comparing stocks for profitability. It is found by dividing market price per share by Earnings Per Share (EPS).

Earnings available to common stock divided by the number of common shares outstanding.

Rate of interest charged by major U.S. banks on loans made to their preferred customers.

Face amount of a security, exclusive of any premium or interest. The basis for interest computations.

Sales of securities not involving a public offering and exempt from registration pursuant to certain exemptions.

A right or immunity granted as a peculiar benefit advantage.

An interest in a transaction, contract or legal action to which one is not a party, arising out of a relationship to one of the parties.

Presentation of financial information that gives effect to an assumed event (e.g., merger).

Distribution of an expense, fund, or dividend proportionate with ownership.

The place in a factory where products are made.

The act or process of creating something.

Positive difference that results from selling products and services for more than the cost of producing these goods.

Used to measure the percentage of each sales dollar that results in net income.

An approach to cost-based pricing in which price is computed using a percentage of a product’s total costs and expenses.

Defined contribution plan characterized by the setting aside of a portion of an entity's profits in participant's accounts.

The ability to earn enough income to attract and hold investment capital.

Prospective financial statements that include one or more hypothetical assumptions.

Evidence of a debt with specific amount due and interest rate. The note may specify a maturity date or it may be payable on demand. The promissory note may or may not accompany other instruments such as a mortgage providing security for the payment thereof.

Long-term tangible assets used in the continuing operation of a business for a long time.

Business owned by an individual without the limited liability protection of a corporation or a Limited Liability Company (LLC). Also known as sole proprietorship.

Forecast: Prospective financial statements that present, to the best of the responsible party's knowledge and belief, an entity's expected financial position, results of operations, and changes in financial position. A financial forecast is based on the responsible party's assumptions reflecting conditions it expects to exist and the course of action it expects to take. Projection: Prospective financial statements that present, to the best of the responsible party's knowledge and belief, given one or more hypothetical assumptions, an entity's expected financial position, results of operations, and changes in financial position.

Major part of the registration statement filed with the Securities And Exchange Commission (SEC) for public offerings. A prospectus generally describes securities or partnership interests to be issued and sold.

Document authorizing someone other than the shareholder to exercise the right to vote the stock owned by the shareholder.

A private-sector, non-profit corporation, created by the Sarbanes-Oxley Act of 2002, to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports.

Offering shares to the public. Generally done through SEC filings.

The POB is an independent oversight board, composed of public members, which monitors and evaluates peer reviews conducted by the SEC Practice Section (SECPS) of the AICPA's Division for CPA Firms as well as other activities of the SECPS.

Accounting for a merger by adding the acquired company's assets at the price paid for them to the acquiring company's assets.

Written authorization to a vendor to deliver specified goods or services at a stipulated price.

A temporary account used under the periodic inventory system to record the total cost of all merchandise purchased for resale during an accounting period.

Discounts taken by merchants in return for prompt payment for merchandise purchased for resale.

A contra account used under the periodic inventory system to accumulate cash refunds, credits on account, and other allowances made by suppliers for unsatisfactory or incorrect merchandise that was originally purchased for resale.

Method of accounting in which the values that arise from an acquisition are transferred or "pushed down" to the accounts of an acquired company.

Audit opinion that states, except for the effect of a matter to which a qualification relates, the financial statements are fairly presented in accordance with Generally Accepted Accounting Principles (GAAP). The auditor is required to qualify when there is a scope limitation.

Relating to quality, especially as distinguished from quantity or amount.

Analysis that evaluates important factors that cannot be precisely measured.

An operating environment in which a company’s product or service meets a customer’s specifications the first time it is produced or delivered.

Analysis dealing with measurable factors as distinguished from such qualitative considerations as the character of management or the state of employee morale.

An amount or number.

Three-month intervals of the year.

Another term for interim financial statements.

Type of reorganization in which, with shareholder approval, the management revalues assets and eliminates the deficit (increased by asset devaluations if any) by charging it to other equity accounts without the creation of a new corporate entity or without court intervention.

Assets that are or are expected to be converted into cash in the near term: cash, accounts receivable, short-term investments.

The relationship of a company’s quick assets to its current liabilities.

Research is a planned activity aimed at discovery of new knowledge with the hope of developing new or improved products and services. Development is the translation of research findings into a plan or design of new or improved products and services.

The amount of profit or interest earned on an investment, usually expressed as a percentage, such as an interest; the cost of capital; the cost of money.

Comparison of actual or projected data for a particular company to other data for that company or industry in order to analyze trends or relationships.

Something in its natural state that will be used in a manufacturing process.

Another term for materials inventory account.

Piece of land and all physical property related to it, including houses, fences, landscaping, and all rights to the air above and earth below the property.

Investor-owned trust which invests in real estate and, instead of paying income tax on its income, reports to each of its owners his or her pro rata share of its income for inclusion on their income tax returns. This unique trust arrangement is specifically provided for in the internal revenue code.

An entity that holds a fixed pool of mortgages and issues multiple classes of interests in itself to investors. A qualified REMIC is generally taxed like a partnership, unless it takes contributions after its startup day or engages in a prohibited transaction.

Income of an individual, group, or country adjusted for changes in purchasing power caused by inflation.

Current interest rate minus inflation rate.

Land and improvements, including buildings and personal property, that is permanently attached to the land or customarily transferred with the land.

Return on an investment adjusted for inflation.

Conversion into cash, as happens in the sale of asset.

Profit or loss resulting from the sale or other disposal of a security.

Management's assessment of the effectiveness of internal control over financial reporting is expressed at the level of reasonable assurance. It includes the understanding that there is a remote likelihood that material misstatements will not be prevented or detected on a timely basis. It is a high level of assurance.

In lending, unearned interest refunded to a borrower if the loan is paid off before maturity.

An internal reorganization of a corporation including a rearrangement of the capital structure by changing the kind of stock or the number of shares outstanding or issuing stock instead of bonds. It is distinguished from most other types of reorganization because it involves only one corporation and is usually accomplished by the surrender by shareholders of their securities for other stock or securities of a different type.

A ratio for measuring the relative size of a company’s accounts receivable and the success of its credit and collection policies during an accounting period.

Amounts of money due from customers or other debtors.

Downturn in economic activity, defined by many economists as at least two consecutive quarters of decline in a country’s gross national product.

To resolve.

Comparison of two numbers to demonstrate the basis for the difference between them.

Period in a business cycle when economic activity picks up and the gross national product grows, leading into the expansion phase of the cycle.

"Pre-release" prospectus offering. An announcement of a future issuance of securities, given restricted circulation during the waiting period of 20 days or other specified period between the filing of a registration statement with the SEC and the effective date of the statement. A red herring is not an offer to sell or the solicitation of an offer to buy.

Price to be paid by an entity to retire its bonds or preferred stock.

Arrangement to provide funding to replace existing financing, the most common being a refinance of a home mortgage.

Replacing an old debt with a new one, often in order to lower the interest costs of the issuer.

Agency responsible for keeping track of the owners of bonds and the issuance of stock.

Statistical technique used to establish the relationship of a dependent variable, such as the sales of a company, and one or more independent variables, such as family formations, gross national product, per capita income, and other economic indicators.

Rate that decreases as the calculation base increases. Often used to describe taxes where the tax rate paid decreases as the taxable income increases.

Commonly called a mutual fund, this is a domestic corporation that acts as an investment agent for its shareholders by typically investing in government and corporate securities and distributing the dividends and interest income earned from such investments. In order to be considered a RIC a corporation must make an irrevocable tax election in order to be treated as one.

Process by which an insurance company obtains insurance on its insurance claims with other insurers in order to spread the risk.

Rate of return resulting from the reinvestment of the interest from a bond or other fixed-income security.

Investor-owned trust which invests in real estate and, instead of paying income tax on its income, reports to each of its owners his or her pro rata share of its income for inclusion on their income tax returns. This unique trust arrangement is specifically provided for in the internal revenue code.

Business or other transaction between persons who do not have an arm's-length relationship (e.g., a relationship with independent, competing interests). The most common is between family members or controlled entities. For tax purposes, these types of transactions are generally subject to a greater level of scrutiny.

Assertions that have a meaningful bearing on whether the account is fairly stated.

An entity that holds a fixed pool of mortgages and issues multiple classes of interests in itself to investors. A qualified REMIC is generally taxed like a partnership, unless it takes contributions after its startup day or engages in a prohibited transaction.

This is a change in the business's capital arrangements. If for a corporation there are seven statutory options for reorganization that would cause the corporation and shareholders to not recognize any gain or loss on the exchange of stock.

Expenditures made in order to keep property in good condition but that does not appreciably prolong the life or increase the value of the property.

Expenditures for making good or whole the portions of property that have deteriorated through use or have been destroyed through accident.

An oral or written description of something, such as a book, event, or situation.

The date the company's financial statements are issued.

Agreement whereby an institution purchases securities under a stipulation that the seller will repurchase the securities within a certain time period at a certain price.

Agreement whereby an institution purchases securities under a stipulation that the seller will repurchase the securities within a certain time period at a certain price.

Return required by investors before they will commit money to an investment at a given level of risk.

Cancel a contract agreement.

Research is a planned activity aimed at discovery of new knowledge with the hope of developing new or improved products and services. Development is the translation of research findings into a plan or design of new or improved products and services.

The Expense of Funding Research And Development (R&D).

Account used to earmark a portion of equity or fund balance to indicate that it is not available for expenditure. An obsolete term in the United States. More commonly used in Europe.

This is an individual that is not a citizen, but who has a residence in the United States. They are taxed on all of their income worldwide in the same manner a citizen of the United States is.

The estimated NET scrap, salvage, or trade-in value of a tangible asset at the estimated date of disposal.

Cash or other assets whose use in whole or in part is restricted for specific purposes bound by virtue of contracted agreements.

Fund established to account for assets whose income must be used for purposes established by donors or grantors of such assets.

Reorganization within an entity. Restructuring may occur in the form of changing the components of capital, renegotiating the terms of debt agreements, etc.

A way of estimating inventory, used in retail business.

Accumulated undistributed earnings of a company retained for future needs or for future distribution to its owners.

The account that reflects the stockholders’ claim to the assets earned from operations and reinvested in corporate operations.

To take something, such as a bond, out of circulation.

Profit on a securities or capital investment, usually expressed as an annual percentage rate.

A measurement of a company’s profitability or overall earning power, that is, how efficiently a company uses its assets to produce income. It is found by dividing income by average total assets.

A measurement of profitability that relates the amount earned by a business to the stockholders’ investments in the business. It is found by dividing net income by average owner's equity.

Ratio measure of the profits achieved by a firm through its basic operations. An indicator of management's general effectiveness and efficiency. The simplest version is the ratio of net income to total assets.

Net pretax profits as a percentage of net sales. A useful measure of overall operational efficiency when compared with the prior periods or with other companies in the same line of business.

Method of determining whether or not income has met the conditions of being earned and realized or is realizable.

Sales of products, merchandise, and services; and earnings from interest, dividend, rents.

Accounting service that provides some assurance as to the reliability of financial information. In a review, a Certified Public Accountant (CPA) does not conduct an examination under Generally Accepted Auditing Standards (GAAS).

Agreement between a Certified Public Accountant (CPA) and his or her client to perform a review.

Formal document that communicates an independent accountant's expression of limited assurance on financial statements as a result of performing inquiry and analytic procedures.

Commonly called a mutual fund, this is a domestic corporation that acts as an investment agent for its shareholders by typically investing in government and corporate securities and distributing the dividends and interest income earned from such investments. In order to be considered a RIC a corporation must make an irrevocable tax election in order to be treated as one.

Right granted by the Federal Consumer Credit Protection Act of 1968 to void a contract within three business days with full refund of any down payment and without penalty.

Debtor's legal right, to discharge all or a portion of the debt owed to another party by applying against the debt an amount that the other party owes to the debtor.

Measurable possibility of losing or not gaining value.

Term referring to the assumption that, given the same return and different risk alternatives, a rational investor will seek the security offering the least risk.

Process of identifying and monitoring business risks in a manner that offers a risk / return relationship that is acceptable to an entity's operating philosophy.

In portfolio theory and capital budget analysis, the rate necessary to determine the present value of an uncertain or risky stream of income; it is the risk-free rate plus a risk premium that is based on an analysis of the risk characteristics of the particular investment or project.

Ratio measure of the profits achieved by a firm through its basic operations. An indicator of management's general effectiveness and efficiency. The simplest version is the ratio of net income to total assets.

Recurring financial activities reflected in the accounting records in the normal course of business.

A corporation which, under the internal revenue code, is generally not subject to federal income taxes. Instead, taxable income of the corporation is passed through to its stockholders in a manner similar to that of a partnership.

Concept in statutes and regulations whereby a person who meets listed requirements will be preserved from adverse legal action. Frequently used where a legal requirement is somewhat ambiguous and carries a risk of punishment for an unintended violation.

Any exchange of goods or services for money.

Sale of property by a seller who simultaneously leases the property back from the purchaser.

A discount that is given to a buyer for early payment for a sale made on credit.

A tax levied by a state or city government on the retail sale of goods and services.

Selling price assigned to retired fixed assets or merchandise unsalable through usual channels.

Statements issued by the Accounting Standards Board of the American Institute of Certified Public Accountants (AICPA).

U.S. government bond issued in face value denominations ranging from $50 to $10,000.

Variations in business or economic activity that recur with regularity as a result of changes in climate, holidays, and vacations.

Agency authorized by the United States Congress to regulate the financial reporting practices of most public corporations.

Financial and informational disclosures required by the SEC to comply with the Securities Act of 1933 and the Securities and Exchange Act of 1934, e.g., FORM 10-K, FORM 10-Q, FORM 8-K.

Disclosure document that must be filed with the SEC in connection with a public offering of securities, unless the offering is exempt.

Exchanges and over-the-counter markets where securities are bought and sold subsequent to original issuance in the primary market.

A bond that gives the bondholders a pledge of certain company assets as a guarantee of repayment.

Debt guaranteed by the pledge of assets or other collateral.

Organized national exchanges where securities, options, and futures contracts are traded by members for their own accounts and for customers.

Agency authorized by the United States Congress to regulate the financial reporting practices of most public corporations.

Trade group that represents broker-dealers.

Source of financing whereby an entity's assets (typically mortgage loans, lease obligations, or receivables) are placed in a special purpose vehicle that issues securities collateralized by such assets.

Any transferable certificate of ownership including equity securities and debt securities.

Legal interest of one person in the property of another to assure performance under a contract.

Taxes paid by individuals in business for themselves to cover social security (OASDI) and Medicare benefits, similar to employer withholdings.

Liquidation of a margin account by a broker after a margin call fails to produce additional equity.

Grouping of expenses reported on a company's profit and loss statement between cost of goods sold and income deductions.

Study measuring the effect of a change in a variable on the risk or profitability of an investment.

Pension plan in which both the employee and the employer contribute to an Individual Retirement Account (IRA).

A business that is treated as distinct from its creditors, customers, and owners.

Bond issue, usually of a municipality, with various maturity dates scheduled at regular intervals until the entire issue is retired.

Method of accounting for securities whereby transactions are recorded on the date the securities settle by delivery or receipt and payment of cash.

Statements issued by the Financial Accounting Standards Board (FASB).

Unit of equity in a corporation.

Owner of one or more shares of stock in a corporation.

Number of shares of stock provided for in the articles of incorporation of a company.

Number of shares in a company that have been issued and remain in circulation.

Bond with a short maturity, generally two years or less.

Bond interest payment covering less than the conventional six-month period.

Total amount of shares of stock that have been sold short and have not yet been repurchased.

Sale of an item before it is purchased, where the seller expects the price to decline before delivery.

Current; ordinarily due within one year.

All debt obligations coming due within one year; shown as current liabilities on a balance sheet.

For tax purposes, the profit or loss realized from the sale of securities or other capital assets held six months or less.

Temporary investment of excess cash, intended to be held until needed to pay current obligations.

Trade group that represents broker-dealers.

Accounts with more than a remote likelihood of containing misstatements that could materially affect the financial statements.

A control deficiency or combination of deficiencies that adversely affects the company's ability to reliably report financial data in accordance with GAAP.

Substantive matters important to audit procedures, evidence obtained, or conclusions reached, including audit adjustments, disagreements, or circumstances affecting audit risk.

Interest calculated only on the original principal amount.

Simplified retirement plan (Savings Incentive Match Plan for Employees) for employers with fewer than 100 employees who earned at least $5,000 the prior year.

Trust required to distribute all income currently, with no charitable contributions; may vary year to year.

Pension plan where both employee and employer contribute to an Individual Retirement Account (IRA).

Establishes requirements for audits of states, local governments, and nonprofits administering federal financial assistance programs above a threshold.

Tax-deferred investment similar to an IRA, without many of the IRA restrictions.

Money accumulated regularly in a separate account to redeem debt securities or preferred stock issues.

C Corporation stock for which noncorporate investors may exclude up to 50% of gain if held over five years and other conditions are met.

Business owned by an individual without the limited liability protection of a corporation or LLC.

State of being able to meet maturing obligations as they come due.

Capable of paying one's financial obligations.

Tax-deferred investment similar to an Individual Retirement Account (IRA), without many of the IRA restrictions.

Charge by a local government for the cost of an improvement or service, usually levied on beneficiaries.

Auditor's report issued for various types of financial presentations, compliance, or prescribed forms requiring a specific auditor report.

Stock exchange member who maintains a fair and orderly market in one or more securities.

Fund that limits investments to a particular sector of the marketplace.

Inventory costing method where the cost of each specific item is tracked.

Assumption of risk in anticipation of gain, with a higher than average possibility of loss.

Transfer of a subsidiary's stock or assets to the parent company's stockholders on a pro-rata basis.

New municipal bond issue, part serial bonds and part term maturity bonds.

Market for buying and selling commodities or financial instruments for immediate delivery and payment.

Difference between two prices, usually a buying and selling price.

Computer application for accounting or bookkeeping.

Statements issued by the AICPA that specifically relate to reviews and compilations.

Widely known and accepted measurement or weight used as a basis for a system of measurements.

Pre-determined costs for direct materials, labor, and overhead.

Fixed amount individual taxpayers can deduct from adjusted gross income if they do not itemize deductions.

Statistical measure of the variation of values in a probability distribution from the mean.

Costs incurred to bring a new unit into production or to begin a business, excluding acquisition costs.

Per share amount set by the board of directors for no-par value stock.

Summary of transactions over a period for customers.

GAAP-required financial statement categorizing cash flows as operating, investing, and financing, and reconciling beginning and ending cash.

Statement summarizing the flow of all manufacturing costs during an accounting period.

Statements issued by the Financial Accounting Standards Board (FASB).

Basic financial statement (balance sheet) showing assets, liabilities, and equity as of a specified date.

Shows changes in an owner’s equity account over a specific financial period.

Statements issued by the Accounting Standards Board of the AICPA.

Statements issued by the AICPA that specifically relate to reviews and compilations.

Time period within which claims may be brought or rights enforced; for tax returns, generally three years from filing or due date.

Basis of inherited property is generally the fair market value at the date of the decedent’s death, potentially higher than decedent’s basis.

Fringe benefit giving employees the option to purchase employer stock at a specified price during a specified period.

Organized marketplace for trading stocks, common stock equivalents, and bonds.

General term for organized trading of securities through exchanges and over-the-counter markets.

Right to purchase or sell a specified number of shares at specified prices and times, with detailed rules on grant date, measurement, in/out-of-the-money options, backdating, accounting, and tax implications.

Rights issued to stockholders to purchase new shares at a stated price, often below market value; may be exercised, sold, or allowed to lapse.

Increase in outstanding shares proportionally to existing shareholders without additional capital; reduces par value per share.

Person who owns shares of stock in a company.

Owner's equity in a corporation.

Accounting method spreading depreciation evenly over an asset’s useful life.

Percentage used to determine depreciation each period under the straight-line method.

Price at which conversion or exercise of a financial instrument occurs.

Material event occurring after the accounting period but before financial statements are published; disclosed in notes.

Company with more than 50% of voting shares owned by another corporation (parent company).

Reasonable possibility that an allocation will materially affect amounts received from a partnership, independent of tax consequences.

Accelerated depreciation method using a decreasing fraction each year of the asset’s useful life.

Extra; not needed.

Person whose spouse died during the tax year; may file joint returns in that year and the following two years under certain conditions.

Financial contract where two parties exchange net payment streams based on indices applied to a notional amount, generally without exchanging principal.

The simplest form of an account, shaped like the letter T, in which increases and decreases in the account can be recorded.

The act or an instance of taking control of something, especially by force.

Assets having a physical existence, such as cash, land, buildings, machinery, or claims on property, investments or goods in process.

A pricing method that (1) identifies the price at which a product will be competitive in the marketplace, (2) identifies the minimum desired PROFIT to be made on the product, and (3) computes a target cost for the product by subtracting the desired profit from the competitive market price.

The attempt is to have the allocations of profit and loss follow the cash. They accomplish this by attempting to make partner capital accounts equal, as closely as possible, to what the partner would receive if the partnership actually liquidated at the end of the year.

Charge levied by a governmental unit on income, consumption, wealth, or other basis.

Original cost of an asset, less accumulated depreciation, that goes into the calculation of a gain or loss for tax purposes.

The U.S. Tax Court is a legislative court functioning to adjudicate controversies between taxpayers and the IRS arising out of deficiencies assessed by the IRS for income, gift, estate, windfall profit and certain excise taxes. It has no jurisdiction over other taxes such as employment taxes. Various sales taxes and certain excise taxes.

Taxpayers age 65 or older or those under 65 who are retired with permanent and total disability are eligible to claim a credit to reduce the amount of their tax liability. It is designed primarily to benefit those individuals who receive small amounts of retirement income. Each taxpayer is allocated an initial base amount based on his or her filing status determining the credit. The base amount is then reduced by the amount of nontaxable income, or is phased out for taxpayers whose adjusted gross income exceeds certain levels.

Encumbrance placed on property as security for unpaid taxes.

Arrangement in which allowable tax deductions or exclusions result in the deferral of tax on income that would otherwise be payable currently.

The period used to compute a taxpayer's taxable income is tax year. It is an annual period that is either a calendar year, fiscal year, or fractional part of a year for which the return is made.

The amount of an employee’s earnings subject to a tax.

Taxable income is generally equal to a taxpayer's adjusted gross income during the tax year less any allowable exemptions and deductions.

Taxable debt obligation of a state or local government entity, an outgrowth of the Tax Reform Act of 1986.

Any individual or other taxable entity that is required to file a return, statement or any other document with the IRS must indicate his (or its) taxpayer identification number. For an individual, the social security number is used, and if you do not have a social security number, the IRS will assign you a TIN. A federal or employer ID number is assigned to other types of entities and will use that as their TIN.

Co-ownership of property. In a valid tenancy-in-common, a deceased co-owner's title passes to his or her heirs without being included in the estate of the deceased co-owner.

Period of time during which the conditions of a contract will be carried out.

Loan for a specified time period.

Criterion used to measure compliance with financial ratio requirements of indentures and other loan agreements.

Price put on the time an investor has to wait until an investment matures, as determined by calculating the present value of the investment at maturity.

The concept that cash flows of equal dollar amounts separated by a time interval have different present values because of the effect of compound interest.

The auditor must perform tests of controls over a period of time that is adequate to determine whether, as of the date specified in management's report, the controls necessary for achieving the objectives of the control criteria are operating effectively.

Any individual or other taxable entity that is required to file a return, statement or any other document with the IRS must indicate his (or its) taxpayer identification number. For an individual, the social security number is used, and if you do not have a social security number, the IRS will assign you a TIN. A federal or employer ID number is assigned to other types of entities and will use that as their TIN.

Information passed by one person to another as a basis for buy or sell action in a security.

The written evidence, such as a deed, that proves legal right of possession or control.

Bond traders’ jargon for $100 million.

Capital structure of a company, including long-term debt and all forms of equity.

Sum of fixed costs, semi-variable costs, and variable costs.

The difference between the actual labor costs incurred and the standard labor costs for the good units produced.

The difference between the actual materials costs incurred and the standard costs of those items.

Excess of the proceeds realized on the sale of either inventory or non-inventory goods.

A lower-of-cost-or-market method of valuing inventory.

An organizational environment in which all business functions work together to build quality into the firm’s products or services.

Buying or selling goods and services among companies, states, or countries, called commerce.

Date when a security transaction is entered into, to be settled on at a later date. Transactions involving financial instruments are generally accounted for on the trade date.

Distinctive name, symbol, motto, or emblem that identifies a product, service, or firm.

Anyone who buys and sells goods or services for profit; a dealer or merchant.

The act of transacting, especially a business agreement or exchange; event or condition recognized by an entry in the book account.

To move or cause to go from one place, person, or thing to another.

Agent, usually a commercial bank, appointed by a corporation, to maintain records of stock and bond owners, to cancel and issue certificates, and to resolve problems arising from lost, destroyed, or stolen certificates.

Price charged by individual entities in a multi-entity corporation on transactions among themselves; also termed transfer cost.

Combined federal tax on gifts and estates.

A person may be held liable for another taxpayer's delinquent taxes if: 1. The transferee received assets of the transferor-taxpayer; and 2. The transferor was insolvent at the time or was rendered insolvent by that transfer or related series of transfers. However the insolvency requirement does not apply to gift taxes. The transferee is only liable to the extent of the value of the property received from the transferor. Thus, transferee liability merely provides a means for the IRS to recover any assets the transferor-taxpayer attempts to transfer to avoid paying taxes.

A transferred basis is the basis of property in the hands of a transferor, donor or grantor. In this sense a prior owner's basis in the property is transferred to the taxpayer. Transferred basis occurs in the following transactions: gifts, transfers in trusts, certain transfers to controlled corporations, contributions to partnerships and liquidating distributions from a corporation.

Company officer responsible for the receipt, custody, investment, and disbursement of funds, for borrowings, and, if it is a public company, for the maintenance of a market for its securities.

A place where private or public funds are controlled.

Short-term obligation that bears no interest and is sold at a discount.

Long-term obligation that matures more than five years from issuance and bears interest.

Direct financial obligations of the United States government.

Intermediate-term obligation that matures one to five years from issuance and bears interest.

Stock reacquired by the issuing company. It may be held indefinitely, retired, issued upon exercise of stock options or resold.

Long-term price or trading volume movements either up, down, or sideways, which characterize a particular market, commodity or security.

A type of horizontal analysis in which percentage changes are calculated for related items for several successive years instead of for two years.

A comparison of the total of debit and credit balances in the ledger to check that they are equal.

Agreement between debtor and creditor which amends the terms of a debt that has little chance of being paid in accordance with its contractual terms. The agreement may involve the transfer of assets in full or partial satisfaction of the debt.

Ancient legal practice where one person (the grantor) transfers the legal title to an asset, called the principal or corpus, to another person (the trustee), with specific instructions about how the corpus is to be managed and disposed.

Person who is given legal title to and management authority over, the property placed in a trust.

The number of times a particular product is sold and restocked during a fixed period of time.

The proposal for a new regulatory framework for the public accounting profession which was developed jointly by the American Institute Of Certified Public Accountants (AICPA) and the National Association Of State Boards Of Accountancy (NASBA). The new framework is intended to enhance interstate reciprocity and practice across state lines by CPAs, meet the future needs of the profession, respond to the marketplace and protect the public that the profession serves.

Difference between the face value of a bond and the proceeds received from the sale of the bond by the issuing company, less whatever portion has been amortized, that is, written off to expense as recorded periodically on the profit and loss statement.

Unexpensed portion of the amount by which the price paid for a security exceeded its par value.

Financial Statements which have not undergone a detailed audit examination by an independent Certified Public Accountant (CPA).

Municipal bond term referring to the debt of government entities within the jurisdiction of larger government entities and for which the larger entity has partial credit responsibility.

Security that must be delivered if a put options or call option contract is exercised.

Security selling below its liquidation value or the market value analysts believe it deserves.

To assume the risk of buying a new issue of securities from the issuing corporation or government entity and reselling them to the public, either directly or through dealers.

Account on the books of a lending institution recognizing interest deducted in advance and which will be taken into income as earned over the life of the loan.

Payments received for services which have not yet been performed.

Interest that has already been collected on a loan by a financial institution, but that cannot yet be counted as part of earnings because the principal of the loan has not been outstanding long enough.

Cash flow from an asset that may vary from one year to the next.

The proposal for a new regulatory framework for the public accounting profession which was developed jointly by the American Institute Of Certified Public Accountants (AICPA) and the National Association Of State Boards Of Accountancy (NASBA). The new framework is intended to enhance interstate reciprocity and practice across state lines by CPAs, meet the future needs of the profession, respond to the marketplace and protect the public that the profession serves.

These are a set of rules intended to be a single comprehensive set of rules to govern the capitalization, or inclusion in inventory of direct and indirect cost of producing, acquiring and holding property. Under the rules, taxpayers are required to capitalize the direct costs and an allocable portion of the indirect costs attributable to real and tangible personal property produced or acquired for resale. The obvious effect of the uniform capitalization rules is that taxpayers may not take current deductions for these costs but instead must be recovered through depreciation or amortization.

Shares of a corporation’s stock authorized in its charter but not issued.

Any division of quantity accepted as a standard of measurement or of exchange.

The responsibility of all the partners in a company for its debt.

Audit opinion not qualified for any material scope restrictions nor departures from Generally Accepted Accounting Principles (GAAP). The auditor may issue an unqualified opinion only when there are no identified material weaknesses and when there have been no restrictions on the scope of the auditor's work. Also known as clean opinion.

A balance sheet account for entering increases or decreases in the value of long-term investments.

Profit or loss that has not become actual.

Resources of a not-for-profit entity that have no restrictions as to use or purpose.

A bond issued on the general credit of a company.

The auditor must conduct the audit of internal control over financial reporting and the audit of the financial statements with professional skepticism, which is an attitude that includes a questioning mind and a critical assessment of audit evidence.

The process of determining the present value of a bond based on the current market interest rate.

Method of lowering or raising an object's current value by adjusting its acquisition cost to reflect its market value by use of a contra account.

How much money something is worth.

Consumption tax levied on the value added to a product at each stage of its manufacturing cycle as well as at the time of purchase by the ultimate consumer.

Life insurance annuity contract whose value fluctuates with that of an underlying securities portfolio or other index of performance.

Total costs that change in direct proportion to changes in productive output or any other measure of volume.

Costs that increase or decrease in direct proportion to the number of units produced.

The portion of mixed or semi-variable overhead costs that changes proportionately with some measure of activity or output.

Loan whose interest rate changes over its life in relation to the level of an index.

Deviation or difference between an estimated value and the actual value.

Consumption tax levied on the value added to a product at each stage of its manufacturing cycle as well as at the time of purchase by the ultimate consumer.

Rate of spending, or turnover of money—in other words, how many times a dollar is spent in a given period of time.

Supplier of goods or services of a commercial nature; may be a manufacturer, importer, or wholesale distributor.

Investment company whose primary objective is capital growth. New assets invested largely in companies that are developing new ideas, products, or processes.

A technique for analyzing financial statements that uses percentages to show the relationships of each stated item to the total, which is 100 percent of the figure in a single statement.

Point at which certain benefits available to an employee are no longer contingent on the employee continuing to work for the employer.

Contract that can be annulled by either party after it is signed because fraud, incompetence, or another illegality exists or because a right of rescission applies.

Tending to rapid and extreme fluctuations.

Characteristic of a security, commodity, or market to rise or fall sharply in price within a short-term period.

Total number of stock shares, bonds, or commodities futures contracts traded in a particular period.

Payment for services of employees at an hourly rate.

The most effective means for an auditor to confirm his understanding how internal control over financial reporting is designed and operates to evaluate and test its effectiveness. It includes making inquiries of and observing the personnel who actually perform the controls; reviewing documents that are used in, and that result from, the application of the controls; and comparing supporting documentation to the accounting records. In a walkthrough, the auditor traces a transaction from origination through the company's information systems to the point where it is reflected in the company's financial reports. Walkthroughs provide the auditor with evidence to: 1. Confirm the auditor's understanding of the process flow of transactions. 2. Confirm the auditor's understanding of the design of controls identified for all five components of internal control over financial reporting, including those related to the prevention or detection of fraud. 3. Confirm that the auditor's understanding of the process is complete by determining whether all points in the process at which misstatements related to each relevant financial statement assertion that could occur have been identified. 4. Evaluate the effectiveness of the design of controls. 5. Confirm whether controls have been placed in operation.

Option to purchase additional securities from the issuer.

A wash sale occurs if stock or securities are sold at a loss and the seller acquires substantially identical stock or securities 30 days before or after the sale. Stock or securities for this purpose includes contracts or operations to acquire or sell stock or securities. Losses incurred in a wash sale cannot be deducted. It does not matter if the total 60 day period begins in one tax year and ends in another. However, the disallowed loss is not permanently lost. Instead, the basis in the newly acquired stock or securities is the same basis as of the stock or securities sold, adjusted by the difference in price of the stock or securities.

An average-cost method procedure for determining the cost of ending inventory under the periodic inventory system.

The sale of goods in large quantities, especially to a person or company that plans to sell them at retail.

Middleman or distributor who sells mainly to retailers, jobbers, other merchants, and industrial, commercial, and institutional users as distinguished from consumers.

Able to collect losses on uncollectible accounts from the seller.

Amount withheld or deducted from employee salaries by the employer and paid by the employer, for the employee, to the proper authority.

Each taxpayer is allowed to claim a withholding allowance, which exempts a certain amount of wages from being subject to withholding. The allowance is designed to prevent too much taxes being withheld from a taxpayer's wages and a person can compute this by completing form W-4 and submitting it to their employer.

Obligated to bear losses from uncollectible accounts.

Inventory account consisting of partially completed goods awaiting completion and transfer to finished inventory.

Excess of current assets over current liabilities.

Direct participation with unlimited liability, as distinguished from passive limited partnership shares.

(1) Records kept by the auditor of the procedures applied, the tests performed, the information obtained, and the pertinent conclusions reached in the course of the audit. (2) Any records developed by a Certified Public Accountant (CPA) during an audit.

A type of working paper used as a preliminary step in the preparation of financial statements.

Second mortgage which conveniently expands the total amount of borrowing by the mortgagor without disturbing the original mortgage.

Charging an asset account to expense or loss.

Written by the general accountability office, the yellow book sets forth standards to be followed in auditing the financial statements of entities that receive federal financial assistance. "Yellow Book" is the name given to "Government Auditing Standards" issued by the Comptroller General of the United States which contains standards for audits of government organizations, programs, activities and functions, and of government assistance received by contractors, nonprofit organizations and other nongovernment organizations.

Return on an investment an investor receives from dividends or interest expressed as a percentage of the cost of the security.

Graph showing the term structure of interest rates by plotting the yields of all bonds of the same quality with maturities ranging from the shortest to the longest available.

YIELD on a bond assuming the bond will be redeemed by the issuer at the first call date specified in the indenture agreement.

Rate of return on a security to its maturity, giving effect to the stated interest rate, accrual of discount, or amortization of premium.

Bond on which the holder receives only one payment at maturity which includes both principal and interest from issuance to maturity.

Zero-coupon bond convertible into the common stock of the issuing company when the stock reaches a predetermined price.