One type of long-term promissory note, frequently issued to the public as a security regulated under federal securities laws.

The recording of financial transactions.

Amount, net of depreciation, or amortization that an asset shows on the balance sheet of a company.

The sales volume at which the expenses of the business exactly equal net revenue, yielding exactly zero profit.

Financial plan that serves as an estimate of future revenue and expenses.

Collection of formal, written rules governing the conduct of a corporation’s affairs.

The financial interest of the owner(s) in the business.

Portion of the total gain recognized on the sale or exchange of a non-inventory asset, which is not taxed as ordinary income; capital gains historically have been taxed at a lower rate than ordinary income.

Ownership shares of a corporation authorized by its articles of incorporation.

Expenditures that are written off during two or more years or other accounting period.

Provision of tax law that allows current losses or certain tax credits to be utilized in the tax returns of future periods.

Method of bookkeeping by which revenues and expenditures are recorded when they are received and paid.

Short-term (generally less than three months), highly liquid investments.

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

Sudden property loss caused by theft, accident, or natural causes.

A journal used to record cash received.

Formal instrument issued by a bank upon the deposit of funds, which may not be withdrawn for a specified time period.

Individual who is trained to develop and implement financial plans for individuals, businesses, and organizations. CFPs utilize knowledge of income and estate tax, investments, risk management analysis, and retirement planning.

Accountant who has satisfied the education, experience, and examination requirements of his or her jurisdiction necessary to be certified as a public accountant.

Asset provided to a creditor as security for a loan.

Capital stock having no preferences generally in terms of dividends, voting rights, or distributions.

Financial statement presentation in which the current amounts and the corresponding amounts for previous periods or dates also are shown.

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

Review of financial records to determine whether the entity is complying with specific procedures or rules.

Combined financial statements of a parent company and one or more of its subsidiaries as one economic unit.

Account considered to be an offset to another account. Contra accounts generally are used to reduce the other account to amounts that can be realized or collected.

Procedures used for classifying, recording, and allocating current or predicted costs that relate to a certain product or production process.

Entry on the right side of a double-entry bookkeeping system that represents the reduction of an asset or expense or the addition to a liability or revenue.

Party that loans money or other assets to another party.

Asset that one can reasonably expect to convert into cash, sell, or consume in operations within a single operating cycle, usually one year.

Obligation that is expected to be paid within one operating cycle, usually one year.

Current assets divided by current liabilities. Current ratio is a measure of a business's short-term solvency.

Value of an asset at the present time as compared with the asset’s historical cost.

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.

Party owing money or other assets to a creditor.

Failure to meet any financial obligation.

Income received but not earned until all events have occurred; deferred income is reflected as a liability.

Assets or liabilities that arise from timing or measurement differences between tax and accounting principles.

Financial shortage that occurs when liabilities exceed assets.

Loan repayable on demand.

Method of computing a deduction to an account for a reduction in value of extractable natural resources such as oil or gas.

Expense allowance made for reduction in the book value of an asset over its estimated useful life.

Costs identified with a specific product being sold.

Payment by cash or check.

Reduction from the full amount of a price or debt.

Rate at which interest is deducted in advance of the issuance, purchasing, selling, or lending of a financial instrument; also, the rate used to determine the current value, or present value, of an asset or income stream.

Present value of future cash estimated to be generated.

Termination of a corporation.

Expense of selling, advertising, and delivering goods and services.

Payment by a business entity to its owners of cash or other property.

Distribution of earnings to owners of a corporation.

Method of recording financial transactions in which each transaction is entered in two or more accounts. This method involves two-way, self-balancing posting, using a equal debits and credits for each transaction.

Wages, salaries, professional fees, and other amounts received as compensation for services rendered.

Measure of performance calculated by dividing the net earnings of a company by the average number of shares outstanding during a period.

Total income taxes expressed as a percentage of net income before taxes.

Stock bonus plan of an employer that acquires securities issued by the plan sponsor.

Residual interest in the assets of an entity that remains after deducting its liabilities; also, the amount of a company's total assets less total liabilities. Equity is the third section of a balance sheet, the other two being assets and liabilities.

Account in the equity section of the balance sheet; includes capital stock, additional paid-in capital, and retained earnings.

Money or property put into the custody of a third party for delivery to a grantee, only after fulfillment of specified conditions; most commonly used in the acquisition of real estate.

Tax on the value of a decendent’s taxable estate, typically defined as the decedent’s assets less liabilities and expenses.

Amount of tax liability a taxpayer may expect to pay for the current tax period, usually paid with quarterly tax payments when withholding from wages or other income is insufficient.

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

Amount of a taxpayer’s income that is not subject to tax. All individuals 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. Exemptions may be limited for high income taxpayers.

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.

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.

Employee retirement plan authorized by Internal Revenue Code section 401(k), whereby an employer establishes an account for each participating employee and each participant elects to deposit a portion of his or her salary into the account.

Amount due at maturity from a bond or note.

Selling a receivable at a discounted value to a third party for cash.

Current 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.

Independent, private, non-governmental authority for the establishment of accounting principles in the United States.

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 and its results of operations at a point in time.

Accounting method of valuing inventory under which the costs of the first goods acquired are the first costs charged to expense.

Period of 12 consecutive months chosen by an entity as its accounting period.

Any tangible asset, with a life of more than one year, used in an entity’s operations.

Expenses of the business that remain constant over the short term and do not fluctuate with the sales volume; often including rent or other fixed costs.

Shipping term meaning free on board, informing the purchaser at what point they become responsible for shipping charges.

Seizure of collateral by a creditor when default under a loan agreement occurs.

Willful misrepresentation by one person of a fact inflicting damage on another person.

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-profit organizations.

See Generally Accepted Accounting Principles.

Excess of revenues received over costs relating to a specific transaction.

Collection of all asset, liability, owner's equity, revenue, and expense accounts.

Partnership with no limited partners.

Conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. The highest level of such principles is set by the Financial Accounting Standards Board (FASB).

Assumption that a business can remain in operation long enough for all of its current plans to be carried out.

Premium paid in the acquisition of an entity over the fair value of its identifiable tangible and intangible assets, less liabilities assumed.

Person to whom property is transferred; a trust.

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.

Original cost of an asset to an entity.

Revenue of a business.

Summary of revenue and expenses for a period of time.

When a private company goes public for the first time.

Partial payment.

Tax accounting method of reporting gain on the sale of an asset exchanged for a receivable.

Asset having no physical existence, such as trademarks and patents.

Payment for the use or forbearance of money.

Financial statements that report the operations of an entity for less than one year.

Audit performed within an entity by its staff rather than an independent certified public accountant.

Method that determines the discount rate at which the present value of the future cash flows will exactly equal investment outlay.

Collection of tax rules of the federal government.

Federal agency that administers the Internal Revenue Code; the IRS is part of the United States Treasury Department.

Tangible property held for sale, or materials used in a production process to make a product.

Expenditure used to purchase goods or services that could produce a return to the investor.

Any book containing original entries of daily financial transactions.

An entry into any of the accounting journals.

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.

Business-owned life insurance contract, typically on the lives of principal officers, that normally provides for guaranteed death benefits to the company and the accumulation of a cash surrender value.

Writing checks against a bank account with insufficient funds to cover them, hoping that the bank will receive deposits before the checks arrive for clearance.

Accounting method of valuing inventory under which the costs of the last goods acquired are the first costs charged to expense.

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.

Person or entity that has the right to use property under the terms of a lease.

Owner of property, the temporary use of which is transferred to another (lessee) under the terms of a lease.

Conditional bank commitment issued on behalf of a customer to pay a third party in accordance with certain terms and conditions.

Debts or obligations owed by one entity (debtor) to another entity (creditor) payable in money, goods, or services.

Form of doing business combining limited liability for all owners (called members) with taxation as a partnership.

General partnership which, via registration with an appropriate state authority, is able to provide all its partners with limited liability.

Partnership in which one or more partners, but not all, have limited liability to creditors of the partnership.

Winding up an activity by distributing its assets to the appropriate parties and settling its debts.

Debt with a maturity of more than one year from the current date.

Excess of expenses over revenue for a period of operations.

Method of valuing assets for financial reporting purposes. Ordinarily, “cost” is the purchase price of the asset and “market” refers to its current replacement cost; generally accepted accounting principles (GAAP) requires that certain assets, such as inventory, be carried at the lower of cost or market.

Reporting designed to assist management in decision-making, planning, and control.

Excess of selling price over the unit cost.

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

Legal instrument evidencing a security interest in assets, usually real estate.

Bond issued by a government or public body, the interest on which typically is exempt from federal taxation.

An investment company that usually offers its shares to the general public and invests the proceeds in other companies.

Excess of total revenues over expenses for a given period.

A special type of lease. In addition to the rental payment, the lessee assumes all property charges such as taxes, insurance, and maintenance; sometimes referred to as a triple net lease.

Sales less any adjustments for returns, allowances, or discounts given.

Excess of assets over liabilities.

An organization that exists for educational or charitable purposes, and from which its owners do not benefit.

Stock authorized to be issued but for which no par value is set in the articles of incorporation.

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

Fixed costs not directly associated with the production of a specific product.

Portion of the stockholders’ equity paid by the stockholders, not earned from operations.

Company that has a controlling interest in the common stock of another entity.

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 any profits or losses.

Amount per share of common stock, set in the articles of incorporation of a corporation.

Loss generated from activities involved in the conduct of a trade or business in which the taxpayer does not usually materially participate; rental property and limited partnership investments are the most common passive activities.

A method of recording inventory that continuously records all receipts and withdrawals of each item of inventory.

Process of developing a comprehensive plan for an individual’s personal, business, and financial problems and concerns.

Financial statements prepared for an individual or family to show financial status.

Movable property that is not affixed to the land, including tangible items such as cash, furniture, cars, and equipment, as well as intangible items, such as royalties, patents, and copyrights.

Asset placed in a trust and used as collateral for a debt.

The process by which transactions are entered into an accounting system.

Type of capital stock that carries preferences over common stock, such as a claim on dividends.

Expenses that are paid in advance for future benefit, such as paying annual insurance premiums; prepaid expenses are assets that are expensed over the period of benefit.

Current value of a given future cash flow stream, discounted at a given rate.

Rate of interest charged by major U.S. banks on loans made to their preferred customers.

Face amount of a security, exclusive of any premium or interest; the amount on which interest is computed.

Net income divided by sales revenue, a ratio used to analyze profitability.

Defined contribution retirement plan characterized by the setting aside of a portion of profits in qualified participants' accounts.

Presentation of financial information to show the results of a projected or assumed event or set of circumstances, such as a possible purchase of real estate or change in sales volume due to a new product.

Prospective financial statements or other accounting report that includes one or more assumptions

Evidence of a debt with specific amount due and interest rate.

Business owned by an individual without the limited liability protection of a corporation or a limited liability company (LLC); also known as sole proprietorship.

Distribution of an expense, fund, or dividend proportionate with ownership.

Document authorizing someone other than the shareholder to exercise the right to vote the stock owned by the shareholder.

Offering shares of an entity to the public, generally through SEC filings.

The total of cash, accounts receivable and marketable securities divided by total current liabilities; this ratio measures the ability of a business to pay off its short-term liabilities.

Investor-owned trust that invests in real estate and, instead of paying income tax on its income, reports pro rata shares of its income for inclusion on each investor's income tax returns.

Land and improvements, including buildings, that are permanently attached to the land.

Price to be paid by an entity to retire its bonds or preferred stock.

Arrangement to provide funding to replace existing financing.

Business or other transaction between persons who do not have an arm’s-length relationship (e.g., a relationship with independent, competing interests); such transactions most commonly occur between family members or controlled entities.

Planned activities to discover new knowledge to allow for the development of new or improved products and services.

Account used to earmark a portion of equity or fund balance to indicate that it is not available for expenditure.

Earnings before interest and taxes divided by net operating assets, a measure of how well a company can repay its debt through use of assets.

Net income divided by total book value of equity, a measure of how well a business is compensating the owners for their investment.

Accumulated undistributed earnings of a company retained for future needs or for future distribution to its owners.

Net income divided by total assets, a measure of the profits achieved by a firm through its basic operations; generally an indicator of management’s effectiveness.

Sales of products, merchandise, and services; earnings from interest, dividend, rents.

Accounting service that provides some assurance as to the reliability of financial information.

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.

A corporation that, under the Internal Revenue Code, generally is not subject to federal income taxes because the taxable income of the corporation is passed through to its shareholders similar to the way partnership income is passed through to partners.

Sale of property by a seller who simultaneously leases the property back from the purchaser.

Securities and Exchange Commission.

Any kind of transferable certificate of ownership.

Legal interest of one person in the property of another.

Current; ordinarily referring to one year or one operating cycle.

See proprietorship.

Charge made by a local government for the cost of an improvement or service, generally with regard to an additional property tax.

Costs incurred to begin a business.

A basic financial statement that is required as part of a complete set of financial statements prepared in conformity with generally accepted accounting principles. The statement categorizes net cash provided or used during a period as operating, investing, and financing activities, and reconciles beginning and ending cash balances.

Statements issued by the Financial Accounting Standards Board (FASB).