Author: Buy Khmer Book

Limited Liability: 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.

Limited Company: A COMPANY, usually registered in the United Kingdom, that is organized to protect its owners from financial responsibility.

LIFO Liquidation: 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.

Lifetime Learning Credit: 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 SHCOLARSHIP CREDIT is not claimed.

Life Expectancy: Age to which an average person can be expected to live, as calculated by an ACTUARY.

Lien: CREDITOR’s claim against property. For example a MORTGAGE is a lien against a house.

Liability: DEBTS or OBLIGATIONS owed by one entity (DEBTOR) to another entity (CREDITOR) payable in money, goods, or services.

Leveraged Lease: 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.

Leveraged Buy Out: Acquisition of a controlling INTEREST in a company in a transaction financed by the issuance of DEBT instruments by the acquired entity.

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

Letter of Intent: Any letter expressing an intention to take an action, sometimes subject to other action being taken.

Letter of Credit: 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.

Lessor: Owner of property, the temporary use of which is transferred to another (LESSEE) under the terms of a LEASE.

Lessee: Person or entity that has the right to use property under the terms of a LEASE.

Lending Securities: 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.

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

Leasehold: Property INTEREST a LESSEE owns in the leased property.

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

Lease: 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.

Lay Off: 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.

Last In, First Out (LIFO): 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.

Land: Property; real estate.

Laissez-Faire: Doctrine that interference of government in business and economic affairs should be minimal.

Labor: Physical or mental effort; work.

Key Industry: Industry of primary importance to a nation’s economy.

Key Employee: 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.

Keogh Plan: 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.

Junk Bonds: DEBT SECURITIES issued by companies with higher than normal credit risk. Considered “non-investment grade” bonds, these SECURITIES ordinarily yield a higher rate of interest to compensate for the additional risk.

Journal Entry: A notation in the GENERAL JOURNAL. It records a single transaction.

Joint Return: A return filed by married taxpayers or surviving spouses.

Jeopardy: 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. The intermediate steps are bypassed.

Issuer: 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.

Issued and Outstanding: Shares of a CORPORATION, authorized in the corporate charter, which have been issued and are outstanding.

Issue: Stock or BONDS sold by a CORPORATION or a government entity at a particular time.

Involuntary Conversions: 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).

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

Investment Tax Credit: 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.

Investment Income: Income from SECURITIES and other non-business investments; such as DIVIDENDS, INTEREST, etc.

Investment Banker: Firm, acting as underwriter or agent, that serves as intermediary between an issuer of SECURITIES and the investing public.

Investment: EXPENDITURE used to purchase goods or services that could produce a return to the investor.

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

Invest : The procedure for converting the INCOME STATEMENT from an ACCRUAL to a CASH BASIS.

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

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

International Mutual Fund: 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.

International Accounting Standards Committee (IASC): 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.

Internal Revenue Service (IRS): Federal agency that administers the INTERNAL REVENUE CODE. The IRS is part of the United States TreasuryDepartment.

More about Internal Revenue Code: Collection of tax rules of the federal government. Also referred to as Title 26 of the United States Code.

Internal Control Over Financial Reporting: 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.

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

Interest Coverage Ratio: A way of measuring the degree of protection that a CREDITOR has from a DEBTOR’s DEFAULT on interestpayments.

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

Insurance: 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.

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

Institute of Management Accounts (IMA): A professional organization made up primarily of management accountants.

Installment Method: 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.

Insolvent: When an entity’s LIABILITIES exceed its ASSETS.

Insolvency: Inability to pay DEBTS when due.

Inside Information: Corporate affairs that have not yet been made public.

Initial Public Offering (IPO): When a private company goes public for the first time.

Inheritance: 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.

Inflation Rate: Rate of change in prices.

Individual Retirement Account (IRA): A personal savings plan that allows an individual to make cash contributions per year dependent on the individual’sadjusted 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.

Indirect Method: The procedure for converting the INCOME STATEMENT from an ACCRUAL to a CASH BASIS.

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

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

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

Independent Broker: 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.