Category: Dictionary

Privilege:​ A right or immunity granted as a peculiar benefit advantage.

Private Placement:​ Sales of SECURITIES not involving a PUBLIC OFFERING and exempt from registration pursuant to certain EXEMPTIONS.

Prime Rate:​ Rate of INTEREST charged by major U.S. banks on loans made to their preferred customers.

Primary Earnings Per Share:​ Earnings available to COMMON STOCK divided by the number of common shares OUTSTANDING.

Price/Earnings (P/E) Ratio:​ 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).

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

Preventive Controls:​ 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.

Prenuptial Contract:​ 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.

Premium Bond:​ BOND with a selling price above face or REDEMPTION VALUE.

Preemptive Right:​ Right giving existing stockholders the opportunity to purchase shares of a new ISSUE before it is offered to others.

Predetermined Overhead Rate:​ 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.

Post-Retirement Benefits:​ PENSIONS, health care, life insurance and other benefits that are provided by an employer to retirees, their dependents, or survivors.

Post-Closing Trial Balance:​ 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.

Portfolio:​ Combined holding of more than one stock, BOND, commodity, real estate investment, cash equivalent, or other ASSET by an individual or institutional investor

Pooling of Interest:​ 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.

Pledged:​ ASSET placed in a TRUST and used as COLLATERAL for a DEBT.

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

Phantom Income:​ Income reported on a TAX BASIS for which no cash or financial benefit is realized.

Personal Financial Statements:​ FINANCIAL STATEMENTS prepared for an individual or family to show financial status.

Personal Financial Specialist (PFS):​ CERTIFIED PUBLIC ACCOUNTANT who specializes in PERSONAL FINANCIAL PLANNING and completes a series of requirements that include education, experience, ethics and an exam.

Personal Financial Planning:​ Process for arriving at a comprehensive plan to solve an individual’s personal, business, and financial problems and concerns.

Periodicity:​ 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.

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

Pension:​ Retirement plan offered by an employer for the benefit of an employee, usually at retirement, through a TRUSTEEwho controls the plan ASSETS.

Penalty:​ 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.

Payout Ratio:​ Percentage of a firm’s profits that is paid out to shareholders in the form of DIVIDENDS.

Payback Period Method:​ 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.

Patronage Dividends:​ 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.

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

Owner’s Equity:​ The residual INTEREST in the assets of a business entity that remains after deducting the entity’s liabilities.

Overhead Application Rate:​ Standard rate used to calculate the OVERHEAD cost of a given activity. Activity often measured in LABOR or machine hours.

Overhead:​ Costs of a business that are not directly associated with the production or sale of goods or services.

Over-the-Counter:​ Sold to customers at retail and without any special restrictions.

Outstanding:​ Not settled or paid.

Outsourcing:​ The act or an instance of purchasing essential products or services from another COMPANY.

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

Other Post-Retirement Employee Benefit (OPEB):​ All post-retirement benefits other than pensions, provided by employers to employees.

Other Comprehensive Basis of Accounting (OCBOA):​ Consistent accounting basis other than GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) used for financial reporting. Examples include an INCOME TAX BASIS or a CASH BASIS.

Original Cost:​ In ACCOUNTING, all costs associated with the acquisition of an ASSET.

Organization Expenditures:​ 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 tern 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.

Organization:​ The act of arranging something in an orderly way.

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

Opportunity Cose:​ Highest price or rate of return an alternative course of action would provide.

Operating Profit (or Loss) :​ The difference between the REVENUES of a business and the related costs and expenses, excluding INCOME derived from a sources other than its regular activities and before income deductions.

Operating Lease:​ 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.

Operating Cycle:​ 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.

Operating Agreement:​ 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.

Open-End Mutual Fund:​ 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.

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

Offer:​ Price at which someone who owns a SECURITY offers to sell it.

Obsolescence:​ The process of becoming out-of-date.

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

Notional:​ Value assigned to ASSETS or LIABILITIES that is not based on cost or market (e.g., the value of a service not yet rendered).

Notes Receivable:​ 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.

Not-for-Profit:​ 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.

Nonresident Alien:​ 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.

Non-Sufficient Funds (NSF) Check:​ A CHECK drawn against an ACCOUNT in which there is not enough money to honor it.

Non-for-Profit Organization/Tax-Exempt Organization:​ 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.

Non-Callable:​ PREFERRED STOCK or BOND that cannot be redeemed at the OPTION of the ISSUER.

Non Routine Transactions:​ Activities that occur only periodically, the data involved are generally not part of the routine flow of transactions.

No-Par Value:​ Stock or bond that does not have a specific value indicated.

No-Par Stock:​ Stock authorized to be issued but for which no PAR VALUE is set in the ARTICLES OF INCORORATION. A STATED VALUE is set by the BOARD OF DIRECTORS on the issuance of this type of stock.

New York Stock Exchange (NYSE):​ 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.

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

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

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

National Association of State Boards of Accountancy (NASBA):​ 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 (NASDAQ):​ 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.

Mutual Fund:​ Investment company which generally offers its shares to the general public and invests the proceeds in a diversified portfolio of SECURITIES.

Mutual Agency:​ The ability of each partner in a COMPANY to act as an agent of the company.

Moving Average Method:​ A modified version of the WEIGHTED-AVERAGE-COST METHOD. It is used to compute the average cost of a PERPETUAL INVENTORY.

Moving Average:​ 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.

Mortgage:​ Legal instrument evidencing a security interest in ASSETS, usually real estate. Mortgages serve as COLLATERAL for PROMISSORY NOTES.

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

Money Market:​ MARKET for SHORT-TERM DEBT instruments.

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

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

Modified Accelerated Cost Recovery System:​ A mandatory system of DEPRECIATION for income tax purposes, enacted by Congress in 1986.

Modeling:​ 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.

Mixed Costs:​ Costs that result when both VARIABLE COSTS and FIXED COSTS are charged to the same GENERAL LEDGER account.

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

Microeconomic Pricing Model:​ 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.

Merchandise:​ Items that can be bought or sold; commercial goods.

Maturity:​ The time at which payment of a loan or BOND becomes due.

Materials Inventory Account:​ An INVENTORY account made up of the balances of materials, parts, and supplies on hand at a given time.

Matching Principle: 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.

Married Taxpayers: 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.

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

Marketing: Moving goods and services from the provider to consumer.

Manufacturing Overhead: Another term for FACTORY OVERHEAD COSTS.

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

Market Share: Percentage of industry sales of a particular COMPANY or product.

Market Interest Rate: The rate of interest paid in the MARKET on BONDS of similar risk.

Market Index: Numbers representing weighted values of the components that make up the INDEX.

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

Markdown: Amount subtracted from the selling price, when a customer sells SECURITIES to a DEALER in the OVER-THE-COUNTER market.

Mark-to-Market: Method of valuing ASSETS that results in adjustment of an asset’s carrying amount to its market value.

Marginal Tax Rate: Amount of tax imposed on an additional dollar of income.

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

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