Glossary
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| X | Y | Z
A
Accelerated Depreciation — 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. (See straight-line depreciation.)
Account — 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
Account Payable — Amount owed to a creditor for delivered
goods or completed services
Account Receivable — Claim against a debtor for an
uncollected amount, generally from a completed transaction of sales
or services rendered
Accountant's Report — 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 accountant's report does not
result from the performance of an audit. (See auditor's report.)
Accounting — Recording and reporting of financial transactions,
including the origination of the transaction, its recognition, processing,
and summarization in the financial statements
Accounting Change — Change in (1) an accounting principle;
(2) an accounting estimate; or (3) the reporting entity that necessitates
disclosure and explanation in published financial reports
Accounting Principles Board (APB) — 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)
Accrual Basis — Method of accounting that recognizes
revenue when earned, rather than when collected. Expenses are recognized
when incurred rather than when paid
Accumulated Depreciation — 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
Additional Paid in Capital — Amounts paid for stock
in excess of its par value or stated value. Also, other amounts
paid by stockholders and charged to equity accounts other than capital
stock
Adverse Opinion — Expression of an opinion in an auditor's
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)
Affiliated Company — 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
American Institute of Certified Public Accountants (AICPA)
— The American Institute of Certified Public Accountants is
the national, professional organization for all Certified Public
Accountants. Its mission is to provide members with the resources,
information, and leadership that enable them to provide valuable
services in the highest professional manner to benefit the public
as well as employers and clients. In fulfilling its mission, the
AICPA works with state CPA organizations and gives priority to those
areas where public reliance on CPA skills is most significant
Analytical Procedures — 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
Annual Report — 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
Annuity — Series of payments, usually payable at specified
time intervals
Audit Engagement — Agreement between a CPA firm and
its client to perform an audit
Auditor's Report — 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 auditor's 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.
(See accountant's report.)
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B
Balance — Sum of debit entries minus the sum of credit
entries in an account. If positive, the difference is called a debit
balance; if negative, a credit balance
Balance Sheet — 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 statement of financial condition
Bankruptcy — 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
Bond — 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
Budget — Financial plan that serves as an estimate
of future cost, revenues or both
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C
Cap — To limit
Capital — Assets intended to further production. The
amount invested in a proprietorship, partnership, or corporation
by its owners
Capital Gain — Portion of the total gain recognized
on the sale or exchange of a noninventory asset which is not taxed
as ordinary income. Capital gains have historically been taxed at
a lower rate than ordinary income
Capital Stock — 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
Capitalized Cost — 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
Capitalized Interest — 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
Cash Basis — Method of bookkeeping by which revenues
and expenditures are recorded when they are received and paid. (See
other comprehensive basis of accounting.)
Cash Flows — Net of cash receipts and cash disbursements
relating to a particular activity during a specified accounting
period
Casualty Loss — Sudden property loss caused by theft,
accident, or natural causes
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
Certified Fraud Examiner (CFE) — A specialist who is
educated and trained in the detection and deterrence of a wide variety
of white-collar crimes such as identity theft, fraud and embezzlement.
CFEs gather evidence, take statements, write reports and assist
in investigating fraud in its varied forms. CFEs are employed by
most major corporations and government agencies, and others provide
consulting and investigative services. Certified Fraud Examiners
come from various professions, including auditors, CPAs, fraud investigators,
loss prevention specialists, attorneys, educators and criminologists.
A CPA with the CFE (Certified Fraud Examiner)
designation is a certified public accountant who specializes in
fraud examination. Having dual certification increases one's credibility,
earning potential and career possibilities due to, in part, increased
demand in the marketplace and the rise in financial crimes. By earning
the CFE credential as a CPA, you'll show prospective employers that
you exemplify the highest moral and ethical standards of the profession
and you have the ability to conduct complete, efficient, thorough
and ethical fraud investigations
Certified Internal Auditor (CIA) — An international
certification awarded by the Institute of Internal Auditors (IIA)
that reflects competence in the principles and practices of internal
auditing
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 Public Accountant (CPA) —
A CPA is an accountant who has satisfied the educational, experience
and examination requirements of his or her jurisdiction necessary
to be certified as a public accountant. CPAs audit financial statements
of both publicly and privately held companies. They serve as consultants
in many areas, including tax, accounting, and financial planning.
They are well-respected strategic business advisors and decisionmakers.
CPAs work for public accounting firms — small, medium and
large; and for companies in business and industry. Their roles range
from accountants to Controllers, to Chief Financial Officers for
Fortune 500 companies, and advisors to small neighborhood businesses
Combined Financial Statement — Financial statement
comprising the accounts of two or more entities
Common Stock — Capital stock having no preferences
generally in terms of dividends, voting rights or distributions.
(See preferred stock.)
Comparative Financial Statement — Financial statement
presentation in which the current amounts and the corresponding
amounts for previous periods or dates also are shown
Compensatory Balance — Funds that a borrower must keep
on deposit as required by a bank
Compilation — Presentation of financial statement data
without the accountant's assurance as to conformity with generally
accepted accounting principles (GAAP)
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
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
Consolidated Financial Statements — Combined financial
statements of a parent company and one or more of its subsidiaries
as one economic unit
Consolidation — 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. (See merger.)
Contra Account — Account considered to be an offset
to another account. Generally established to reduce the other account
to amounts that can be realized or collected
Control Risk — Measure of risk that errors exceeding
a tolerable amount will not be prevented or detected by an entity's
internal controls
Corporation — 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
Cost Accounting — Procedures used for rationally classifying,
recording, and allocating current or predicted costs that relate
to a certain product or production process
Credit Agreement — Arrangement in which one party borrows
or takes possession in the present by promising to pay in the future
Credit Balance — Balance remaining after one of a series
of bookkeeping entries. This amount represents a liability or income
to the entity. (See balance.)
Creditor — Party that loans money or other assets to
another party
Current Asset — 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
Current Liability — Obligation whose liquidation is
expected to require the use of existing resources classified as
current assets, or the creation of other current liabilities
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
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D
Debit — 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. (See credit.)
Debit Balance — Balance remaining after one or a series
of bookkeeping entries. This amount represents an asset or an expense
of the entity. (See balance.)
Default — Failure to meet any financial obligation.
Default triggers a creditor's rights and remedies identified in
the agreement and under the law.
Deferred Income — Income received but not earned until
all events have occurred. Deferred income is reflected as a liability
Deficit — Financial shortage that occurs when liabilities
exceed assets
Depletion — Method of computing a deduction to account
for a reduction in value of extractable natural resources
Depreciation — Expense allowance made for wear and
tear on an asset over its estimated useful life. (See accelerated
depreciation and straight-line depreciation.)
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
Disbursement — Payment by cash or check
Disclosure — Process of divulging accounting information
so that the content of financial statements is understood
Discount — Reduction from the full amount of a price
or debt
Distributions — Payment by a business entity to its
owners of items such as cash assets, stocks, or earnings
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
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
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E
Earned Income — Wages, salaries, professional fees,
and other amounts received as compensation for services rendered
Equity — 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.
Escrow — Money or property put into the custody of
a third party for delivery to a grantee, only after fulfillment
of specified conditions
Estate Tax — Tax on the value of a decedent's taxable
estate, typically defined as the decedent's assets less liabilities
and certain expenses which may include funeral and administrative
expenses
Ethics — The process of determining how one should
hold the interests of various stakeholders, taking into account
moral values/principles
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
Exemption — 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
Expenditure — Payment, either in cash, by assuming
a liability, or by surrendering asset
External Reporting — Reporting to stockholders and
the public, as opposed to internal reporting for management's benefit
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F
Financial Accounting Standards Board (FASB) — Independent,
private, non-government group which is authorized by the accounting
profession to establish generally accepted accounting principles
in the U.S
Fair Market Value — 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
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
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
Fiscal Year — 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.
Forecast — Prospective financial statements that are
an entity's expected financial position, results of operations,
and cash flows
Foreclosure — Seizure of collateral by a creditor when
default under a loan agreement occurs
Forensic Accounting — Provides for an accounting analysis
that is suitable to a court of law which will form the basis for
discussion, debate, and ultimately dispute resolution. Forensic
accounting encompasses investigative accounting and litigation support.
Forensic accountants utilize accounting, auditing, and investigative
skills when conducting an investigation. Equally critical is the
ability to respond immediately and to communicate financial information
clearly and concisely in a courtroom setting
Franchise — Legal arrangement whereby the owner of
a trade name, the franchiser, contracts with a party that wants
to use the name on a non-exclusive basis to sell goods or services,
the franchisee. Frequently, the franchise agreement grants strict
supervisory powers to the franchiser over the franchisee which,
nevertheless, is an independent business
Fraud — The use of one's occupation for personal enrichment
through the deliberate misuse or misapplication of employing an
organization's resources or assets. This can include the fraudulent
conversion and obtaining of money or property by false pretenses
Fund Accounting — 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. (See restricted fund and unrestricted fund.)
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G
General Ledger — Collection of all asset, liability,
owners equity, revenue, and expense accounts
Goodwill — Premium paid in the acquisition of an entity
over the fair value of its identifiable tangible and intangible
assets less liabilities assumed
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
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I
Income — Inflow of revenue during a period of time.
(See net income.)
Income Statement — Summary of the effect of revenues
and expenses over a period of time
Income Tax Basis — (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. (See other comprehensive basis of accounting.)
Insolvent — When an entity's liabilities exceed its
assets
Installment — One of the portions, usually equal, into
which a debt is divided for payment at specified intervals over
a fixed period
Interest — Payment for the use or forbearance of money
Internal Control — Process designed to provide reasonable
assurance regarding achievement of various management objectives
such as the reliability of financial reports
Internal Revenue Service (IRS) — Federal agency that
administers the internal revenue code. The IRS is part of the United
States Treasury Department
Inventory — Tangible property held for sale, or materials
used in a production process to make a product
Investment — Expenditure used to purchase goods or
services that could produce a return to the investor
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J
Joint Venture — When two or more persons or organizations
gather capital to provide a product or service. Often carried out
as a partnership
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
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L
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
Liability — Debts or obligations owed by one entity
(debtor) to another entity (creditor) payable in money, goods, or
services
Limited Liability Company (LLC) — 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
Limited Liability Partnership (LLP) — 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
Liquidation — Winding up an activity by distributing
its assets to the appropriate parties and settling its debts
Litigation Support/Dispute Resolution — 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.
Loss — 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. (See net income.)
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M
Management Accounting — Reporting designed to assist
management in decision-making, planning, and control. Also known
as Managerial Accounting
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
Merger — 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. (See consolidation.)
Mortgage — Legal instrument evidencing a security interest
in assets, usually real estate. Mortgages serve as collateral for
promissory notes
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N
Negligence — 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 one fails to exhibit the care which one ought to
exhibit, whether it be slight, ordinary, or great
Net Assets — Excess of the value of securities owned,
cash, receivables, and other assets over the liabilities of the
company
Net Income — Excess or deficit of total revenues and
gains compared with total expenses and losses for an accounting
period. (See income and loss.)
Net Sales — Sales at gross invoice amounts less any
adjustments for returns, allowances, or discounts taken
Net Worth — Similar to equity, the excess of assets
over liabilities
Non-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
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O
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
Option — Right to buy or sell something at a specified
price during a specified time period
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P
Partnership — 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. (See
general partnership, limited liability partnership, limited partnership.)
Perpetual Inventory — System that requires a continuous
record of all receipts and withdrawals of each item of inventory
Premium — (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
Present Value — Current value of a given future cash
flow stream, discounted at a given rate
Pro Forma — Presentation of financial information that
gives effect to an assumed event (e.g., merger)
Projection — Prospective financial statements that
include one or more hypothetical assumptions
Promissory Note — 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. (See demand loan.)
Pro Rata — Distribution of an expense, fund, or dividend
proportionate with ownership
Prospective Financial Information (Forecast and Projection)
— 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
Prospectus — 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
Proxy — Document authorizing someone other than the
shareholder to exercise the right to vote the stock owned by the
shareholder
Public Company Accounting Oversight Board (PCAOB) —
Five-member board created by Sarbanes Oxley Act which has the authority
to set and enforce auditing, attestation, quality control, and ethics
(including independence) standards for public companies. It is also
empowered to inspect the auditing operations of public accounting
firms that audit public companies as well as impose disciplinary
and remedial sanctions for violations of the board's rules, securities
laws, and professional auditing standards
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R
Refinancing Agreement — Arrangement to provide funding
to replace existing financing, the most common being a refinance
of a home mortgage
Research and Development (R&D) — 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
Return on Investment (ROI) — 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
Revenues — Sales of products, merchandise, and services;
and earnings from interest, dividend, rents
Risk Management — 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
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S
Sarbanes Oxley Act — An act designed to improve quality
and transparency in financial reporting and independent audits and
accounting services for public companies, to create a Public Company
Accounting Oversight Board, to enhance the standard-setting process
for accounting practices, to strengthen the independence of firms
that audit public companies, to increase corporate responsibility
and the usefulness of corporate financial disclosure, to protect
the objectivity and independence of securities analysts, to improve
Securities and Exchange Commission resources and oversight and for
other purposes
Safe Harbor Rule — Concept in statutes and regulations
whereby a person who meets listed requirements will be preserved
from adverse legal action. Frequently, safe harbors are used where
a legal requirement is somewhat ambiguous and carries a risk of
punishment for an unintended violation
SEC Filings — Financial and informational disclosures
required by the SEC in order to comply with certain sections of
the Securities Act of 1933 and the Securities and Exchange Act of
1934. Some of the more common filings that publicly owned companies
must submit are the form 10-K, form 10-Q and form 8-K
Security — Any kind of transferable certificate of
ownership including equity securities and debt securities
Short Sale — Sale of an item before it is purchased.
A person entering into a short sale believes the price of the item
will decline between the date of the short sale and the date he
or she must purchase the item to deliver the item under the terms
of the short sale
Special Report — Special report is a term applied to
auditors' reports issued in connection with various types of financial
presentations, including financial statements that are prepared
in conformity with a comprehensive basis of accounting other than
generally accepted accounting principles; specified elements, accounts
or items of a financial statement. Compliance with aspects of contractual
agreements or regulatory requirements related to audited financial
statements. Financial presentations to comply with contractual agreements
or regulatory provisions. Financial information presented in prescribed
forms or schedules that require a prescribed form of auditors' reports.
Spread — Difference between two prices, usually a buying
and selling price
Start-up Costs — (1) Costs, excluding acquisition costs,
incurred to bring a new unit into production. (2) Costs incurred
to begin a business
Statement of Cash Flows — A statement of cash flows
is one of the basic financial statements that is required as part
of a complete set of financial statements prepared in conformity
with generally accepted accounting principles. It categorizes net
cash provided or used during a period as operating, investing and
financing activities, and reconciles beginning and ending cash and
cash equivalents
Stock Option — Right to purchase or sell a specified
number of shares of stock at specified prices and times
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T
Tangible Asset — Assets having a physical existence,
such as cash, land, buildings, machinery, or claims on property,
investments, or goods in process. (See intangible assets.)
Tax — Charge levied by a governmental unit on income,
consumption, wealth, or other basis
Trust — Ancient legal practice where one person (the
grantor) transfers the legal title to an asset, called the principle
or corpus, to another person (the trustee), with specific instructions
about how the corpus is to be managed and disposed
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V
Variance — Deviation or difference between an estimated
value and the actual value
Venture Capital — Investment company whose primary
objective is capital growth. New assets invested largely in companies
that are developing new ideas, products, or processes
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W
Withholding — Amount withheld or deducted from employee
salaries by the employer and paid by the employer, for the employee,
to the proper authority
Working Capital — Excess of current assets over current
liabilities
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Y
Yellow Book — Written by the general accounting 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, non-profit organizations, and other non-government
organizations
Yield — Return on an investment an investor receives
from dividends or interest expressed as a percentage of the cost
of the security.