Category: Dictionary

Held-to-Maturity Security: A DEBT SECURITY that management intends to hold to its MATURITY or payment date and whose cash value is not needed until that date.

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

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

Half-Life: 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.

Guaranty: 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.

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

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

Grantee: Person to whom property is transferred.

Government Accountability Office (GAO): Accounting and auditing office of the United States government. An independent agency that reviews federal financial transactions and reports directly to Congress.

Governing Documents: 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.

Goods Available for Sale: 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.

Going Public: Activities that relate to offering a private company’s shares to the general investing public including registering with the SEC.

Going Private: 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.

General Partnership: PARTNERSHIP with no limited partners.

Governmental Accounting Standards Board (GASB) : Group that has authority to establish standards of financial reporting for all units of state and local government.

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

Funding: Refinancing a DEBT on or before its MATURITY; also called REFUNDING and, in certain instances, pre-refunding.

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

Form W-4: 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.

Form 8-K: 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.

Form 10-Q: SEC filing which is the quarterly report due 45 days after each of the first three quarter.ends of each fiscal year.

Form 10-K: SEC filing which is the ANNUAL REPORT due 90 days after the registrant’s BALANCE SHEET date.

Foreign Exchange: Instruments employed in making payments between countries.

Foreign Currency Translation: 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.

Foreign Corporation: 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.

Forecasting of Cash Flow: Projecting the cash receipts and the cash payments for a future period.

Forecasted Income Statement: An INCOME STATEMENT that projects the NET INCOME of a business for a future period.

Forecasted Balance Sheet: A balance sheet that projects the financial position of a business for a future period.

Forecast: Prospective FINANCIAL STATEMENTS that are an entity’s expected financial position, results of operations, and cash flows.

FOB Shipping Point: A shipping term that means that the buyer bears transportation costs from the point of origin.

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

Free On Board (FOB) : Indicates the point at which title to goods passes.

Flotation Cost: Cost of issuing new stocks or BONDS

Floor: Term used when discussing INVENTORIES. Inventory cannot be valued lower than the “floor” which is the netrealizable value of the inventory less an allowance for a normal profit margin.

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

Fixed Assets: Tangible LONG TERM ASSETS used in the continuing operation of a business that are unlikely to change for a long time.

First In, First Out (FIFO): 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.

Firm : A business partnership, especially when it is unincorporated.

Financial Statements: 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.

Financial Leverage: The ability to increase earnings for stockholders by earning more on ASSETS than is paid in INTEREST on DEBTincurred to finance the assets.

Financial Institution: 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.

Filing of Returns: 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.

Fiduciary: 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.

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

Federal Reserve Bank: One of the 12 banks that, with their branches, make up the FEDERAL RESERVE SYSTEM.

Federal Income Taxes: Taxes on NET INCOME that must be paid to the federal government by individuals and businesses.

Favorable Variance: Excess of actual REVENUE over projected revenue, or actual costs over projected costs.

Fair Credit Reporting Act: Federal law enacted in 1971 giving persons the right to see their credit records at credit reporting bureaus.

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

Factoring: Over-Advances: 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.

Factoring : Selling a RECEIVABLE at a discounted value to a third party for cash.

Extraordinary Items: 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.

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

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

Extent of Tests of Control: 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.

Extension: 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.

Exploration Expenditures: 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.

Experienced Auditor: 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.

Expense Ratio: Amount, expressed as a percentage of total investment, that shareholders pay for MUTUAL FUND operating expenses and management fees.

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

Expatriation Tax: 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.

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

Exclusions: 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.

Excluded Income : See EXCLUSIONS.

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

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

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

Estimated Tax: Amount of tax LIABILITY a taxpayer may expect to pay for the current tax period. Usually paid through quarterly installments.

Estate Tax: Tax on the value of a DECENDENT’S taxable estate, typically defined as the decedent’s ASSETS less LIABILITIES and certain expenses which may include funeral and administrative expenses.

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

Equity Securities: CAPITAL STOCK and other SECURITIES that represent ownership shares, or the legal rights to purchase or acquire CAPITAL STOCK.

Equity Method of Accounting: 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.

Equity Financing: Raising the money by issuing shares of COMMON STOCK or PREFERRED STOCK.

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

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

Engagement Completion Document: 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.

Endorsement: 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.

Employee Stock Ownership Plan (ESOP): Stock bonus plan of an employer that acquires SECURITIES issued by the plan sponsor.

Emerging Issues Task Force (EITF): 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.

Effective Tax Rate: Total income taxes expressed as a percentage of NET INCOME before taxes.

Effective Interest Rate: The rate of INTEREST actually paid or earned.

Effective Interest Method: 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.

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

Econometrics: 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.

<span style="color: #ff0000;Earnings Price Ratio: Relationship of EARNINGS PER SHARE (EPS) to current stock price.

Earnings Per Share (EPS): Measure of performance calculated by dividing the net earnings of a company by the average number of shares outstanding during a period.

Earned Income Tax Credit (EITC): A refundable tax credit for eligible low income workers, subject to computations based on qualifying children and phase in and phase out income levels.

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

Due Diligence: (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.

Due Date: 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.

Dual Dating: Dating of the ACCCOUNTANTS’ 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. For example, “January 3, 19xx, except for Note x, as to which the date is March 10, 19xx.”

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

Double-Entry Bookkeeping: 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.

Double-Declining-Balance Depreciation Method (DDB): Method of ACCELERATED DEPRECIATION, approved by the INTERNAL REVENUE SERVICE (IRS), permitting twice the rate of annual DEPRECIATION as the STRAIGHT-LINE DEPRECIATION method.

Double Taxation: The act of taxing corporate earnings twice, once as the NET INCOME of the CORPORATION and once as the DIVIDENDS distributed to stockholders.

Documentation Completion Date: 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.

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

Dividends Payable: A LIABILITY for payment of a COMPANY’s earnings to its shareholders.

Dividends in Arrears: DIVIDENDS on cumulative PREFERRED STOCK that remain unpaid in the year they are due.

Dividend Payout Ratio: Percentage of earnings paid to shareholders in CASH.