Category: Dictionary

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

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

Dissolution: Termination of a CORPORATION.

Disposable Income: Personal INCOME remaining after personal taxes and noncommercial government fees have been paid.

Discretionary Trust: Arrangement in which the TRUSTEE has the authority to make INVESTMENT decisions and has control over investments within the framework of the TRUST instrument.services.

Discounted Cash Flow: Present value of future cash estimated to be generated.

Discount Yield: Yield on a SECURITY sold at a DISCOUNT.

Discount Bond: BOND selling below its REDEMPTION VALUE.

Discount: Reduction from the full amount of a price or DEBT.

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

Disclosure: Process of divulging accounting information so that the content of FINANCIAL STATEMENTS is understood.

Disclaimer of Opinion: 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.

Direct Overhead: Portion of OVERHEAD costs allocated to manufacturing, by the application of a standard factor termed a BURDEN RATE or OVERHEAD APPLICATION RATE.

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

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

Detailed Income Statement: A complete and explicit statement of an economic entity’s financial activities and holdings.

Derivatives: 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.

Deposit Method: Expense allowance made for wear and tear on an ASSET over its estimated useful life.

Dependent Care Expenses: 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.

Demand Loan: Loan repayable on demand. Also known as a CALL LOAN.

Deflation: Decline in the prices of goods and services.

<span style="color: #ff0000"Defined Contribution Plan: See EMPLOYEE BENEFIT PLAN.

Deficiency in Operation: 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.

Deficiency in Design: 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.

Deferred Payment Annuity: ANNUITY whose contract provides that payments to the annuitant be postponed until a number of periods have elapsed.

Deferred Interest Bond: BOND that pays INTEREST at a later date.

Deferred Income Taxes: ASSETS or LIABILITIES that arise from timing or measurement differences between tax and accounting principles.

Deferral: The postponement of the date that an expense already paid or incurred, or of a REVENUE already received, is entered in the LEDGER.

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

Decedent: 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.

Declare : Authorize the payment of DIVIDEND on a specified date, an act of the BOARD OF DIRECTORS of a CORPORATION.

Decedent: Individual who has died.

Debt-to-Equity Ratio : A way of measuring the relationship of DEBT financing to EQUITY FINANCING, or the extent to which a companyis leveraged.

Coupon: INTEREST rate on a DEBT SECURITY the ISSUER promises to pay to the holder until maturity, expressed as an annual percentage of FACE VALUE. INTEREST rate on a DEBT SECURITY the ISSUER promises to pay to the holder until maturity, expressed as an annual percentage of FACE VALUE.

Debt Security: Document which is evidence of an obligation or LIABILITY.

Debt Retirement: Repayment of DEBT.

Debt Instrument: Written promise to repay a DEBT.

Debt: General name for money, notes, BONDS, goods or services which represent amounts owed.

Debenture Stock: 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.

Debenture: General DEBT obligation backed only by the integrity of the borrower and documented by an agreement called and INDENTURE.

Death Benefit: 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)

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

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.

Date of Auditors’/Accountants’ Report: Last day the AUDITORS perform fieldwork and the last day of responsibility relating to significant events subsequent to the financial statement date.

Current Yield: Annual INTEREST on a BOND divided by the market price.

Current Value: 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.

Creditor: Party that loans money or other ASSETS to another party.

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

Coverdell Education Savings Account (Education IRA): A tax exempt trust exclusively for the purpose of paying qualified higher education costs of the trusts designated beneficiary.

Coupon: INTEREST rate on a DEBT SECURITY the ISSUER promises to pay to the holder until maturity, expressed as an annual percentage of FACE VALUE.

Cost Basis: 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.

Corporate Bond: DEBT instrument issued by a private CORPORATION, as distinct from one issued by a government agency or a municipality.

Copyright: 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.

Convertible Stock : Stock that may be exchanged for other SECURITIES of the issuer.

Conversion : 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.

Controls Tests: 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.

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

Contra-Liability Account: A deduction from a LIABILITY, such as discounts on notes payable, which is a deduction from the balance of notes payable.

Continuing Professional Education (CPE): 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.

Continuing Operations:Portion of a business entity expected to remain active.

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

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

Consolidated Financial Statements: Combined FINANCIAL STATEMENTS of a parent company and one or more of its subsidiaries as one economic unit

Constructive Receipt: 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.

Consistency: 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.

Comprehensive Income: 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.

Conservatism: 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.

Condensed Financial Statement: A FINANCIAL STATEMENT for external reporting that presents only the major categories of information.

Compound Interest Principles: Interest computed on principal plus interest earned in previous periods.

Complex Trust: 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.

Compilation Report: See ACCOUNTANTS’ REPORT.

Compilation Engagement : Agreement between a CPA firm and its client to issue a COMPILATION REPORT.

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

Compensate: To pay or make payment for something.

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

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

Company: Organization engaged in business as a PROPRIETORSHIP, PARTNERSHIP, CORPORATION, or other form of enterprise.

Commodities: Bulk goods such as grains, metals, and foods traded on a commodities exchange or on the SPOT MARKET.

Committee of Sponsoring Organizations of the Treadway Commission (COSO): An alliance of five professional organizations dedicated to disseminating appropriate internal control standards.

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

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

Comfort Letter: 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.

Combined Financial Statement: FINANCIAL STATEMENT comprising the accounts of two or more entities.

Collateralized Mortgage Obligation (CMO): 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.

Collateral: ASSET provided to a CREDITOR as security for a loan.

Co-Mingling: Mixing ASSETS, e.g. customer-owned SECURITIES, with those owned by a firm in its proprietary accounts.

Closed-End Mutual Fund: MUTUAL FUND with a fixed number of shares outstanding that may be bought or sold. CMO – See COLLATERALIZED MORTGAGE OBLIGATION.

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

Claim for Refund: 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.

Chief Financial Officer (CFO): Executive officer who is responsible for handling funds, signing CHECKS, keeping financial records, and financial planning for a CORPORATION.

Chief Executive Officer (CEO): Officer of a firm principally responsible for the activities of a COMPANY.

Certified Public Accountant (CPA): ACCOUNTANT who has satisfied the education, experience, and examination requirements of his or her jurisdiction necessary to be certified as a public accountant.

Certified Management Accountant (CMA): 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.

Certified Internal Auditor (CIA): Internal AUDITOR who has satisfied the examination requirements of the Institute of Internal Auditors.

Certified Financial Planner (CFP): 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.

Cash Payments Journal: A multicolumn journal used to record sums of cash paid out for expenses.

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

Certificate of Deposit (CD) : 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.

Cash Flow to Sales: A way of measuring the ability of sales to generate operating CASH FLOWS.

Cash Flow to Assets: Used to measure the ability of ASSETS to generate operating CASH FLOWS.