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Account at a bank, savings and loan association, credit union, or brokerage firm that belongs to a federal or private insurance organization. System whereby individuals and companies that are concerned about potential hazards pay premiums to an insurance company, which reimburses them in the event of loss. A legal document used for a specific purpose, such as paying for goods received. Rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market. Minor materials and other production supplies that cannot be conveniently and economically traced to specific products. Net of cash outflows and inflows attributable to a corporate investment project.
- Collection of formal, written rules governing the conduct of a CORPORATION’S affairs (such as what officers it will have, what their responsibilities are, and how they are to be chosen).
- Short-term (generally less than three months), highly liquid INVESTMENTS that are convertible to known amounts of cash.
- Written authorization to a vendor to deliver specified goods or services at a stipulated price.
- ZERO-COUPON BOND convertible into the COMMON STOCKof the issuing COMPANY when the stock reaches a predetermined price.
- Any amount which may require payment by an entity at a future time.
- Stock rights are rights issued to stockholders of a CORPORATION that entitle them to purchase new shares of stock in the corporation for a stated price that is often substantially less than the FAIR MARKET VALUE of the stock.
The difference between the actual LABOR costs incurred and the standard labor costs for the good units produced. Information passed by one person to another as a basis for buy or sell action in a SECURITY. The concept that CASH FLOWS of equal dollar amounts separated by a time interval have different present values because of the effect of compound INTEREST. Price put on the time an investor has to wait until an INVESTMENT matures, as determined by calculating the PRESENT VALUE of the investment at MATURITY. Taxable DEBT obligation of a state or local government entity, an outgrowth of the Tax Reform Act of 1986. Arrangement in which allowable tax deductions or EXCLUSIONS result in the deferral of tax on INCOME that would otherwise be payable currently.
Fund consisting of ASSETS where the holder agrees to remit the assets, income from the assets, or both, to a specified beneficiary in due course or at a specified time. 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. Receipts for shares of foreign company stock maintained by an intermediary indicating ownership. Profits that are not paid out as DIVIDENDS but are instead added to the company’s capital base.
The TAX that an incorporated business must pay to the federal government and, often, to state and city governments as well. The excess of REVENUES over all variable costs related to a particular sales volume. Review of financial records to determine whether the entity is complying with specific procedures or rules.
Accountants’ Report
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. Excess of the value of SECURITIES owned, cash, receivables, and other ASSETS over the LIABILITIES of the company. The omission to do something which a reasonable man, guided by those ordinary considerations which ordinarily regulate human affairs, would do, or the doing of something which a reasonable and prudent man would not do. The term refers only to that legal delinquency which results whenever a man fails to exhibit the care which he ought to exhibit, whether it be slight, ordinary, or great. It is characterized chiefly by inadvertence, thoughtlessness, inattention, and the like, while “wantonness” or “recklessness” is characterized by willfulness.
- Earnings available to COMMON STOCK divided by the number of common shares OUTSTANDING.
- Accounting service that provides some assurance as to the reliability of financial information.
- Criterion used to measure compliance with financial ratio requirements of indentures and other LOAN agreements.
- The auditor is required to disclaim depending on the limitation in scope.
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. 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. Difference between current assets and current liabilities; another name for WORKING CAPITAL.
Earned Income Tax Credit (EITC)
The payments are usually determined by applying different indices (e.g., interest rates, foreign exchange rates, equityindices) to a NOTIONAL amount. The term notional is used because swap contracts generally do not involve exchanges of PRINCIPAL. Generally, the basis of property acquired by INHERITENCE, BEQUEST or device from a DECENDANT is the FAIR MARKET VALUE of the property on the date of the decendant’s death. Thus if the fair market value is more than the decedent’s basis, a taxpayers basis in the property received is stepped-up.
Working Capital
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. Process by which direct material mix variance definition an accounting firm’s practice is evaluated for compliance with professional standards. The objective is achieved through the performance of an independent review by one’s peers.
What Does Understatement Mean in Accounting?
Suppose you start your business using cash accounting, then switch to the accrual method. Under accrual accounting, you don’t wait for payment; you enter income as soon as you’ve earned it. That changes not only when you report income, but how you track it in your ledgers. Also assume that the correct/actual/true amount of accounts payable is $230,000. In this situation, an accountant will say that the reported amount of accounts payable is understated by $20,000. In a double-entry accounting system, the amount in another account will also be understated by $20,000.
A process by which an accountant determines whether and why there is a difference between the balance shown on the bank statement and the balance of the cash account in the firm’s GENERAL LEDGER. Written communication issued by an independent CERTIFIED PUBLIC ACCOUNTANT (CPA) describing the character of his or her work and the degree of responsibility taken. A professional examination of a company’s financial statement by a professional accountant or group to determine that the statement has been presented fairly and prepared using GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). National professional membership organization that represents practicing CERTIFIED PUBLIC ACCOUNTANTS (CPAs).
Net Current Assets
The use of an intermediate agent, such as a bank, to disguise the source of money received from illegal activities. Magnitude of an omission or misstatements of ACCOUNTING information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would change or be influenced. The price investors are willing to pay for a share of stock on the open market. Public place where products or services are bought and sold, directly or through intermediaries. DEBTS or OBLIGATIONS owed by one entity (DEBTOR) to another entity (CREDITOR) payable in money, goods, or services.
Increase in the value of an ASSET such as a stock, BOND, commodity, or real estate. The recognition of an expense or revenue that has occurred but has not yet been recorded. A financial record of an individual ACCOUNT PAYABLE in which entries can be made daily. 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. No they will be overstated as depreciation will not have been
taken into account.