1000 accounting terms, plain-English definitions, formulas, worked examples, and FAQs, built for U.S. small business owners, founders, and bookkeepers.
A 1031 Exchange, also known as a like-kind exchange, allows an investor to defer paying capital gains taxes on the sale of an investment property when they reinvest the proceeds into a new, similar investment property within specific timeframes.
1099-K — definition, examples, related terms, and FAQs.
Form 1099-MISC, Miscellaneous Information, is an IRS tax form employers use to report certain types of miscellaneous income payments made to non-employees, such as rent, medical and health care payments, and awards, typically totaling $600 or more in a calendar year.
Form 1099-NEC is an IRS tax form used to report payments of nonemployee compensation, such as payments to independent contractors, freelancers, and other service providers, typically totaling $600 or more in a calendar year.
13-Week Cash Flow is a forward-looking financial tool that forecasts a business's cash inflows and outflows over the next 13 weekly periods, providing a critical short-term view of liquidity.
401(k) Plan — definition, examples, related terms, and FAQs.
409A Valuation — definition, examples, related terms, and FAQs.
501(c)(3) Organization — definition, examples, related terms, and FAQs.
An 83(b) Election is an IRS filing that allows a taxpayer to pay ordinary income tax on the fair market value of restricted stock or other property at the time of grant, rather than when the stock vests.
An Above-the-Line Deduction is a specific type of expense that reduces your gross income before calculating adjusted gross income (AGI), directly lowering your overall taxable income.
Absorption costing is an accounting method that includes all manufacturing costs—direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead—in the cost of a product.
Account reconciliation is the process of comparing your internal financial records (like your general ledger) with external statements (like bank or credit card statements) to ensure they match and identify any discrepancies.
An Accountable Plan is an IRS-compliant reimbursement arrangement allowing businesses to pay back employees for legitimate business expenses without the reimbursements being considered taxable income for the employee or subject to payroll taxes for the employer.
The accounting cycle is a systematic, eight-step process used to record and process all financial transactions of a business, ensuring accurate financial statements at the end of an accounting period.
The Accounting Equation is a fundamental principle stating that a company's total assets always equal the sum of its liabilities and owner's equity, forming the basis for all double-entry accounting.
Accounting estimates are educated guesses or informed judgments made by businesses and their Accounting & Tax Professionals when exact figures aren't available at the time financial statements are prepared.
An Accounting Period is a specific length of time for which a business records and reports its financial activities, like a fiscal year or a quarter, to track performance.
Accounting policies are the specific principles, bases, conventions, rules, and practices applied by a business in preparing and presenting its financial statements, guiding how transactions are recorded.
Accounting software is a computer program or suite of programs designed to process and record financial transactions, helping businesses manage their money, track income and expenses, and generate financial reports.
Accounting Standards are the essential set of rules and guidelines that dictate how financial transactions must be recorded, summarized, and presented in financial statements, ensuring consistency and clarity for businesses and stakeholders alike.
The Accounting Standards Codification (ASC) is the single, authoritative source of generally accepted accounting principles (GAAP) for non-governmental entities in the United States.
Accounts Payable — definition, examples, related terms, and FAQs.
Accounts Receivable (AR) represents money owed to your business by customers for goods or services already delivered but not yet paid for, typically appearing as a current asset on your balance sheet.
Accretion Dilution Analysis is a financial evaluation used in mergers and acquisitions to determine if an acquisition will increase (accretive) or decrease (dilutive) the acquiring company's earnings per share (EPS).
Accrual accounting recognizes income when earned and expenses when incurred, regardless of when cash changes hands, offering a more accurate financial picture over time.
Accrual to cash conversion measures how effectively a business transforms its accrual-based financial activities, like sales and expenses, into actual cash received or paid out, revealing true liquidity and operational efficiency.
Accrued expenses are costs a business has incurred but hasn't yet paid, representing a liability on its balance sheet until paid.
Accrued Interest — definition, examples, related terms, and FAQs.
Accrued liabilities are expenses a business has incurred but not yet paid, representing future obligations like wages due or services received without an invoice.
Accrued payroll is the amount of wages, salaries, and other employee-related expenses that a business owes its employees for work performed but has not yet paid as of a specific date.
Accumulated Deficit — definition, examples, related terms, and FAQs.
Accumulated Depreciation is a total of all depreciation expense recorded for an asset since it was first put into service, reducing its book value on the balance sheet.
Accumulated Other Comprehensive Income (AOCI) is a section within a company's equity that keeps track of certain gains and losses that bypass the traditional income statement but still affect the company's overall value.
An ACH Transfer is a digital funds movement from one bank account to another through the Automated Clearing House (ACH) network, commonly used for payroll, bill payments, and vendor disbursements.
The Acid Test Ratio, or Quick Ratio, measures a company's ability to pay its short-term debts with its most liquid assets, excluding inventory. It's a tough test of immediate financial health.
Activity-Based Budgeting (ABB) is a budgeting method that identifies all business activities, calculates their costs, and then allocates resources based on the demand for those activities, leading to more accurate and efficient financial planning.
Activity-Based Costing — definition, examples, related terms, and FAQs.
Add-Backs — definition, examples, related terms, and FAQs.
Additional Paid-In Capital — definition, examples, related terms, and FAQs.
Adjusted EBITDA is a financial metric that takes a company's earnings before interest, taxes, depreciation, and amortization, and then further adjusts it for non-recurring, one-time, or unusual items to show a clearer picture of operational profitability.
Adjusted Gross Income (AGI) is a key figure on your federal income tax return, calculated by taking your gross income and subtracting specific deductions, often called "above-the-line" deductions.
Adjusting entries are journal entries made at the end of an accounting period to record revenues earned and expenses incurred that have not been recorded yet. They ensure financial statements accurately reflect a business's financial position and performance.
The Adoption Credit is a nonrefundable federal tax credit designed to help families offset certain qualified expenses incurred during the adoption process of an eligible child.
ADS Depreciation, or the Alternative Depreciation System, is a specific method for calculating depreciation on business assets, often used for tax purposes, foreign use property, or when electing out of bonus depreciation.
Adverse Opinion — definition, examples, related terms, and FAQs.
Advertising expense is the cost a business pays to promote its products, services, or brand, typically to generate sales or attract new customers. It's an ordinary and necessary business expense.
The AICPA is the leading organization for Accounting & Tax Professionals in the United States, setting ethical and auditing standards, developing the Uniform Accounting & Tax Professionals Exam, and advocating for the profession.
Allowance for Doubtful Accounts — definition, examples, related terms, and FAQs.
Alpha Return measures a portfolio's actual outperformance compared to a benchmark index, after accounting for market risk. It's the 'extra' return generated by a manager's skill.
The Alternative Minimum Tax (AMT) is a separate income tax calculation that ensures certain taxpayers pay at least a minimum amount of tax, especially those who significantly reduce their regular taxable income through specific deductions and credits.
American Opportunity Credit — definition, examples, related terms, and FAQs.
Amortization is the accounting process of expensing the cost of an intangible asset over its useful life or spreading out loan payments over time.
Amortization Expense is the accounting process of spreading the cost of an intangible asset over its useful life, recorded as an expense on the income statement.
Amortization Schedule — definition, examples, related terms, and FAQs.
Analytical Procedures — definition, examples, related terms, and FAQs.
An Angel Investor is a high-net-worth individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity, often offering valuable mentorship alongside funding.
Annual Recurring Revenue (ARR) is a key financial metric representing the predictable, normalized revenue a business expects to receive from its subscription services or contracts over a 12-month period, excluding one-time fees.
Annual Report Filing — definition, examples, related terms, and FAQs.
Anti-Deferral Rules are tax laws designed to prevent U.S. taxpayers from indefinitely postponing U.S. tax on certain passive or highly mobile income earned through foreign entities.
Anti-Dilution Provision — definition, examples, related terms, and FAQs.
API Integration — definition, examples, related terms, and FAQs.
Articles of Incorporation — definition, examples, related terms, and FAQs.
ASC 350 provides the main rules for how businesses should account for their intangible assets and goodwill, ensuring clear reporting on these non-physical business resources.
ASC 606 is an accounting standard that provides a five-step model for businesses to recognize revenue from contracts with customers, ensuring consistent and comparable financial reporting.
ASC 805, or Accounting Standards Codification 805, is the GAAP standard that outlines how companies should account for business combinations, such as mergers and acquisitions.
ASC 842 — definition, examples, related terms, and FAQs.
Asset Sale — definition, examples, related terms, and FAQs.
Asset Turnover — definition, examples, related terms, and FAQs.
Assets are items of value owned by your business that can be converted into cash. They are resources expected to provide future economic benefits, helping your business generate income and grow.
Assets Recognition is the accounting process of formally recording an economic resource that your business owns or controls, which is expected to provide future economic benefits, on your financial statements.
An Attestation Engagement involves an Accounting & Tax Professional examining and reporting on a subject matter, or an assertion about a subject matter, that is the responsibility of another party.
Audit — definition, examples, related terms, and FAQs.
Audit Opinion — definition, examples, related terms, and FAQs.
Audit Risk — definition, examples, related terms, and FAQs.
Audit Sampling — definition, examples, related terms, and FAQs.
An Audit Trail is a step-by-step record of financial transactions, account changes, or system activities that allows you to trace data from its starting point to its final destination, providing transparency and accountability.
Audit-ready books are meticulously organized and accurate financial records that provide a clear, understandable, and verifiable picture of a business's financial transactions, ready for review by external parties like tax authorities or lenders.
Authorized Shares — definition, examples, related terms, and FAQs.
Available-for-Sale Securities are investments a business holds that are not intended for immediate sale or held to maturity, and their value fluctuates with the market, impacting equity rather than income until sold.
Backflush Costing — definition, examples, related terms, and FAQs.
Backup withholding is an IRS requirement for certain payers to withhold a percentage of reportable payments when the payee fails to provide a correct taxpayer identification number (TIN) or other conditions are met.
Bad debt expense is the cost a business incurs from customers who cannot or will not pay their outstanding debts for goods or services already delivered.
A Balance Sheet is a financial statement that provides a snapshot of a company's financial health at a specific point in time, detailing its assets, liabilities, and owner's equity.
Bank Draft — definition, examples, related terms, and FAQs.
Bank Feed — definition, examples, related terms, and FAQs.
Bank Feed Integration — definition, examples, related terms, and FAQs.
Bank reconciliation is the process of comparing your business's cash records in its books with the corresponding bank statement to identify and explain any differences, ensuring both balances match.
A bank statement is a summary of all financial transactions occurring in a bank account over a specific period, typically a month, providing a snapshot of deposits, withdrawals, and balances.
A Bankers Acceptance is a time draft drawn on and accepted by a bank, committing the bank to pay a specified sum on a specified future date, primarily used in international trade to guarantee payment.
Base Erosion refers to practices used by multinational companies to reduce their taxable income in one country by shifting profits to lower-tax jurisdictions or deducting payments made to related foreign entities.
A basket threshold is a specific minimum aggregate amount of losses or damages that must be exceeded before a buyer in an acquisition can claim indemnification from the seller for breaches of representations and warranties.
The Base Erosion Anti-Abuse Tax (BEAT) is an additional tax on certain large corporations with substantial payments to foreign related parties, designed to prevent erosion of the U.S. tax base.
A Below-the-Line Deduction is a specific type of deduction, also known as an itemized deduction, that taxpayers can claim on Schedule A (Form 1040) to reduce their taxable income.
Benefit Corporation — definition, examples, related terms, and FAQs.
Beta Coefficient — definition, examples, related terms, and FAQs.
A Bill and Hold Arrangement is a sales agreement where a seller bills a customer for goods but retains physical possession until a later delivery date.
Biological assets are living animals and plants held by an entity for their agricultural produce, such as livestock for milk or meat, or fruit trees for fruit, and are accounted for by tracking changes in their fair value.
Blue Chip Stock — definition, examples, related terms, and FAQs.
A Board of Directors is a group of individuals elected by shareholders (or appointed by founders) to oversee the management and strategic direction of a company, ensuring it operates in the best interests of its stakeholders.
Board-Designated Funds are resources set aside by a nonprofit organization's governing board for a specific purpose, although the board retains the ultimate authority to change that designation in the future.
Bond — definition, examples, related terms, and FAQs.
Bonds Payable represents a company's promise to repay borrowed money on a specific future date, along with regular interest payments to bondholders, serving as a formal debt instrument.
Bonus Depreciation — definition, examples, related terms, and FAQs.
Bonus Pay — definition, examples, related terms, and FAQs.
Book value represents the net value of an asset or a company as recorded on its balance sheet. It's calculated by taking the asset's original cost and subtracting accumulated depreciation, or for a company, total assets minus total liabilities.
Book Value of Asset — definition, examples, related terms, and FAQs.
Book Value of Equity is the total value of assets minus liabilities, as recorded on a company's balance sheet, representing the capital owners would theoretically receive if assets were sold and debts paid off.
Book Value Per Share — definition, examples, related terms, and FAQs.
Book-to-Market Ratio — definition, examples, related terms, and FAQs.
Bookkeeping is the systematic recording of financial transactions for a business, laying the groundwork for all financial reports and tax filings.
Books Cleanup — definition, examples, related terms, and FAQs.
Books Closed to Adjustments — definition, examples, related terms, and FAQs.
Bottom-Up Budgeting — definition, examples, related terms, and FAQs.
Bounced Check — definition, examples, related terms, and FAQs.
The Break-Even Point is the level of sales (in units or dollars) where your total revenues equal your total costs, meaning your business has neither made a profit nor incurred a loss.
A break-up fee, also known as a termination fee, is a penalty paid by one party to another if a merger or acquisition deal falls through due to specific reasons outlined in the agreement.
Bridge financing is a short-term loan designed to provide immediate capital for a business to cover expenses or seize opportunities until a more permanent, long-term financing solution can be secured. It bridges the gap between funding needs.
A budget is a detailed financial plan that estimates future income and expenses over a specific period, typically a year, to guide financial decisions and assess performance.
Budget Variance — definition, examples, related terms, and FAQs.
Budget-to-Actual compares your planned financial estimates (budget) against your real-world financial results (actuals) over a specific time, revealing where your business is on track or off course.
Buildings, in accounting, are long-term assets representing structures used for business operations, subject to depreciation over their useful life, influencing a company's balance sheet and tax liabilities.
A bundled contract combines multiple distinct goods or services into a single agreement, requiring businesses to allocate the total transaction price to each separate component for revenue recognition purposes.
Burn Rate — definition, examples, related terms, and FAQs.
Business combination accounting is the process of recording the acquisition of one business by another, following specific accounting standards to ensure all assets, liabilities, and equity are properly recognized.
Business Purpose Doctrine — definition, examples, related terms, and FAQs.
C Corporation — definition, examples, related terms, and FAQs.
A Calendar Year is the 12-month period beginning January 1st and ending December 31st, serving as a standard accounting and tax period for many businesses and individuals.
Callable Bond — definition, examples, related terms, and FAQs.
Callable debt is a type of loan or bond that gives the issuer the right, but not the obligation, to repay the principal amount before its scheduled maturity date.
Cap Table — definition, examples, related terms, and FAQs.
Capacity Variance measures the cost difference between the actual production level and the normal or planned production capacity, primarily due to under- or overutilization of fixed overhead resources.
A Capital Account represents an owner's or partner's individual share of equity in a business, reflecting their contributions, profits, and withdrawals over time.
Capital Asset Pricing Model — definition, examples, related terms, and FAQs.
A capital budget is a financial plan that outlines a business's long-term expenditures for major assets, such as property, plant, and equipment, to determine which projects are worth pursuing.
Capital Budgeting — definition, examples, related terms, and FAQs.
Capital Call — definition, examples, related terms, and FAQs.
Capital Gains Tax is a tax on the profit you make when you sell an asset that has increased in value, such as real estate, stocks, or business property.
Capital Lease — definition, examples, related terms, and FAQs.
A Capital Lease Obligation is basically recognizing a long-term rental agreement, where you're essentially buying an asset through payment, on your company's balance sheet as both an asset and a debt.
The Capitalization Ratio measures the proportion of a company's total assets financed by long-term debt and equity, indicating its long-term financial structure and ability to meet long-term obligations.
Card Not Present — definition, examples, related terms, and FAQs.
Carried Interest — definition, examples, related terms, and FAQs.
Cash and Cash Equivalents represent a business's most liquid assets, including physical currency, bank deposits, and highly liquid, short-term investments that are easily convertible to cash.
Cash Basis Accounting records income when cash is received and expenses when cash is paid out, offering a straightforward approach to tracking money in and out of your business.
A Cash Budget is a detailed plan that forecasts a business's cash inflows and outflows over a specific period, helping to predict cash shortages or surpluses.
The Cash Conversion Cycle (CCC) measures the time it takes for a business to convert its investments in inventory and accounts receivable into cash, highlighting the efficiency of its working capital management.
The Cash Conversion Ratio (CCR) measures how effectively a business turns its sales revenue into actual cash flow from operations, indicating its efficiency in cash generation.
The Cash Coverage Ratio measures a business's ability to cover its current liabilities with the cash generated from its operating activities, providing insight into its short-term debt repayment capacity.
Cash Discount — definition, examples, related terms, and FAQs.
A cash dividend is a distribution of money paid by a company from its profits to its shareholders, typically as a reward for their investment.
Cash equivalents are highly liquid, short-term investments that can be quickly converted into a known amount of cash, playing a crucial role in a business's liquidity and short-term financial management.
A Cash Flow Forecast is an estimate of the money expected to flow in and out of your business over a specific period, helping you anticipate future cash needs or surpluses.
Cash Flow from Financing — definition, examples, related terms, and FAQs.
Cash flow from investing activities reports the cash generated or spent on investments, like buying or selling property, equipment, or other businesses.
Cash Flow from Operations shows how much cash your business generates from its primary, everyday activities before considering investments or financing. It's a key measure of your business's health.
A Cash Flow Statement is a financial report that shows how much cash a business generates and uses over a period, detailing money flowing in and out from operating, investing, and financing activities.
Cash Position refers to the total amount of readily available cash a business holds at a specific point in time, including bank balances and cash on hand, indicating its immediate liquidity.
Cash Ratio — definition, examples, related terms, and FAQs.
Cash Reserves — definition, examples, related terms, and FAQs.
Cash runway measures how many months a business can continue operating before running out of cash, assuming current spending levels and no new income.
Cash to Accrual Conversion — definition, examples, related terms, and FAQs.
Cashiers Check — definition, examples, related terms, and FAQs.
Catch-up bookkeeping is the process of updating and organizing a business's financial records for a past period where entries were missed, incomplete, or incorrectly recorded, bringing the books current and accurate.
Certificate of Deposit — definition, examples, related terms, and FAQs.
Certificate of Good Standing — definition, examples, related terms, and FAQs.
Certified Payroll — definition, examples, related terms, and FAQs.
Change in Working Capital measures the increase or decrease in a business's current assets minus current liabilities over a period, directly impacting cash flow.
A chargeback is when a customer disputes a transaction with their bank or credit card company, causing the funds to be forcibly returned to them, often resulting in fees for the business.
A Charitable Remainder Trust (CRT) is an irrevocable split-interest trust that allows you to donate assets to charity while retaining an income stream for yourself or other beneficiaries for a specified term or life.
A Chart of Accounts (COA) is a categorized list of all the financial accounts used by your business to record transactions, offering a structured framework for organizing your financial data.
Chart of Accounts Mapping — definition, examples, related terms, and FAQs.
Chart of Accounts Setup — definition, examples, related terms, and FAQs.
Charter documents are the foundational legal papers that establish a business entity, outlining its core structure, purpose, and operational rules, and they are filed with the relevant state authority.
Check kiting is a fraudulent scheme where a person takes advantage of the time lag between when a check is deposited and when the funds are actually withdrawn from the bank it's drawn on, effectively creating non-existent balances to cover other transactions.
Child Tax Credit — definition, examples, related terms, and FAQs.
Churn rate measures the rate at which customers or subscribers stop doing business with your company over a specific period, indicating customer retention effectiveness.
Class Tracking allows businesses to categorize income and expenses by department, project, or location, providing detailed financial reporting for specific segments of their operations.
A Classified Balance Sheet organizes a business's assets, liabilities, and owner's equity into distinct categories, like current and non-current, to provide a clearer, more detailed picture of its financial position at a specific point in time.
A clawback provision is a contractual clause that requires an employee, executive, or other recipient to return money or benefits received under specific, predefined circumstances.
Clearing Account — definition, examples, related terms, and FAQs.
Cliff Vesting — definition, examples, related terms, and FAQs.
A closing balance sheet is a financial snapshot of a company's assets, liabilities, and equity on the final day before an acquisition or merger, serving as a critical benchmark for valuation adjustments.
Closing entries are journal entries made at the end of an accounting period to transfer the balances of temporary accounts (like revenues and expenses) to permanent accounts, making them ready for the next period.
Cloud accounting uses internet-based software to manage financial data and transactions, allowing businesses to access their books from anywhere, anytime, without needing dedicated on-site servers.
Commercial paper is a short-term, unsecured debt instrument issued by large, financially sound corporations to meet their immediate cash needs, typically with maturities ranging from a few days to 270 days.
Commission pay is a form of compensation where an employee earns a percentage of the sales they generate or services they provide, often in addition to a base salary or as their sole income.
Common Size Financial Statements display every line item as a percentage of a base figure, like total sales or total assets, to simplify financial analysis and comparison.
Common stock represents ownership shares in a company, giving shareholders voting rights and a claim on residual assets and earnings after preferred stockholders and creditors are paid. It's the most prevalent type of equity for businesses big and small.
A common-law employee is an individual whose services are controlled by an employer regarding what work is done and how it's done, dictating tax and payroll obligations for businesses.
Comparability in accounting means financial information can be meaningfully compared between different periods for the same company or across different companies, providing valuable insights for decision-making.
Comparable Company Analysis (CCA) is a business valuation method that estimates a company's worth by comparing it to similar businesses that have recently been sold or publicly traded. It relies on the principle that similar businesses should have similar valuation multiples.
Comparative financial statements present a company's financial figures side-by-side for multiple periods, allowing quick identification of trends, growth, or decline in key areas like sales, profits, and expenses.
Compensating Balance — definition, examples, related terms, and FAQs.
A compilation engagement is a professional service where Accounting & Tax Professionals help prepare financial statements for a business without offering any assurance (like an audit or review) regarding their accuracy, completeness, or conformity to accounting principles.
The Completed Contract Method (CCM) is an accounting method where revenue and expenses for a long-term contract are recognized only when the contract is fully finished.
Component depreciation is an accounting method that separates a single asset into its individual components, each with its own estimated useful life, for depreciation purposes. This typically allows for accelerated depreciation deductions.
Concentration Account — definition, examples, related terms, and FAQs.
Confirmation Letter — definition, examples, related terms, and FAQs.
The Conservatism Principle in accounting means that when faced with uncertainty, businesses should choose the accounting method that results in lower assets and revenues, and higher liabilities and expenses, presenting the most cautious financial picture.
Consignment Inventory — definition, examples, related terms, and FAQs.
The Consistency Principle means a business uses the same accounting methods and procedures from one accounting period to the next, allowing for reliable comparison of financial information over time.
Consolidated Financial Statements combine the financial reports of a parent company and its controlled subsidiaries into one single, unified set of financial reports, showing the economic picture of the entire group as if it were one business.
The Consolidation Method combines the financial statements of a parent company and its controlled subsidiaries into a single set of financial statements, presenting them as if they were one economic entity.
Constant Purchasing Power is an accounting concept that adjusts historical financial data for inflation, showing the real economic value of assets, liabilities, and income over time.
Construction in Progress (CIP) is an asset account on a company's balance sheet that tracks the accumulated costs of a long-term construction project that isn't yet finished, like a new building or significant machinery.
A contingent liability is a potential obligation for your business that might happen depending on the outcome of a future event. It's not a definite expense yet, but one that could arise.
Continuous Budgeting — definition, examples, related terms, and FAQs.
Contract Asset — definition, examples, related terms, and FAQs.
Contract Liability — definition, examples, related terms, and FAQs.
Contract Modification — definition, examples, related terms, and FAQs.
Contributed Capital — definition, examples, related terms, and FAQs.
Contribution Margin is the revenue left over from selling a product or service after covering its direct, variable costs. It shows how much each sale contributes to covering fixed costs and generating profit.
A Contribution Margin Income Statement organizes costs differently from a traditional income statement, separating fixed and variable expenses to highlight how much revenue is available to cover fixed costs and generate profit.
The Contribution Margin Ratio is a vital managerial accounting metric that shows the percentage of sales revenue available to cover fixed costs and generate profit after variable costs are paid, indicating how efficiently each sales dollar contributes to your business's bottom line.
Control risk is the chance that a material misstatement will happen and not get caught and fixed by a company's internal control system.
Controlled Disbursement is a banking service that provides accurate, early-morning notification of the total dollar amount of checks that will clear a company's bank account each day, allowing for precise funding of disbursements.
A Controlled Foreign Corporation (CFC) is a foreign company primarily owned by US shareholders, subject to specific US tax rules under Subpart F.
Conversion Cost — definition, examples, related terms, and FAQs.
A convertible bond is a type of debt instrument that allows the bondholder to convert it into a pre-determined number of the issuing company's common stock shares at specific times during the bond's life.
Convertible debt is a type of loan that can be repaid normally or converted into an ownership stake (equity) in the company, typically at the lender's option.
Convertible Note — definition, examples, related terms, and FAQs.
Convertible Preferred Stock — definition, examples, related terms, and FAQs.
Convexity — definition, examples, related terms, and FAQs.
Cooperative — definition, examples, related terms, and FAQs.
Copyrights grant creators exclusive legal rights to their original works, like books, music, or software, for a set period, making them valuable intangible assets for businesses.
The Corporate Alternative Minimum Tax (CAMT) is a 15% minimum tax on the adjusted financial statement income of large corporations, ensuring they pay a base level of tax regardless of deductions and credits. Implemented by the Inflation Reduction Act of 2022.
A corporate bond is a type of debt security issued by a company to raise capital, promising to pay interest to bondholders over a specified period and repay the principal at maturity.
Corporate Bylaws — definition, examples, related terms, and FAQs.
Corporate minutes are the official, written records of meetings held by a corporation's board of directors and shareholders, documenting decisions, resolutions, and actions taken to ensure legal compliance and transparency.
Corporate Officers — definition, examples, related terms, and FAQs.
Corporate Tax refers to the taxes a business pays on its profits, often at a flat rate, to federal and state governments. It's a fundamental obligation for corporations operating in the US.
Correcting Entry — definition, examples, related terms, and FAQs.
Corrective controls are steps a business takes to fix problems and errors after they've happened. They help get things back on track and prevent similar issues in the future.
The COSO Framework is a widely recognized standard that guides businesses in establishing and maintaining effective internal controls to ensure accurate financial reporting, operational efficiency, and compliance with laws.
Cost Accounting — definition, examples, related terms, and FAQs.
Cost allocation is the process of identifying, grouping, and assigning indirect costs to different cost objects, such as products, services, or departments, in a systematic way.
Cost Behavior — definition, examples, related terms, and FAQs.
A cost driver is any factor or activity that causes a change in the total cost of an activity or an object. It's what makes a cost go up or down, helping businesses understand why things cost what they do.
Cost of Debt is the effective interest rate a company pays on its borrowed money, considering all financing costs and tax deductions, reflecting the true expense of using external funds.
Cost of Equity is the return a company needs to deliver to its shareholders to compensate them for the risk of investing in its stock, essential for valuing a business and making investment choices.
Cost of Goods Sold (COGS) represents the direct costs of producing the goods your business sells, including direct materials and direct labor.
Cost of Sales, also known as Cost of Goods Sold (COGS), is the direct expense of producing the goods your business sells or the direct cost of the services directly rendered to earn revenue.
Cost Pool — definition, examples, related terms, and FAQs.
The Cost Principle dictates that assets should be recorded at their original purchase price, or historical cost, at the time of acquisition, regardless of current market value fluctuations.
The Cost Recovery Method refers to how businesses deduct the cost of assets over their useful life, allowing them to recover the capital invested in property, plant, and equipment through depreciation.
The Cost Recovery Method Revenue is an accounting principle where a business recognizes revenue only after all costs associated with a sale or contract have been collected from the customer.
Cost-Volume-Profit Analysis — definition, examples, related terms, and FAQs.
Coupon rate is the fixed annual interest payment a bond issuer pays to the bondholder, expressed as a percentage of the bond's face value.
Credit Rating — definition, examples, related terms, and FAQs.
Current Assets are a company's short-term resources that can be converted into cash or used up within one year or one operating cycle of the business, whichever is longer. They represent the liquid wealth ready for immediate use.
Current Cost Accounting is an accounting method that values a company's assets and liabilities at their current replacement cost rather than their original historical cost, aiming to provide a more realistic picture of financial health during times of changing prices.
Current liabilities are your business's short-term debts and financial obligations due within one year or one operating cycle, whichever is longer. They represent what your business owes to others and must be paid relatively soon.
Current Ratio — definition, examples, related terms, and FAQs.
A custodial account holds assets for a beneficiary, typically a minor, managed by an adult custodian, with specific IRS rules for taxation and reporting.
Customer Acquisition Cost (CAC) is the total expense a business incurs to gain a new customer, including marketing and sales efforts.
Customer Deposits — definition, examples, related terms, and FAQs.
Customer Lifetime Value — definition, examples, related terms, and FAQs.
Cycle counting is an inventory auditing procedure where a small subset of inventory is counted on a specific schedule, rather than conducting a single, annual physical inventory count.
Days Inventory Outstanding — definition, examples, related terms, and FAQs.
Days Payable Outstanding — definition, examples, related terms, and FAQs.
Days Sales Outstanding (DSO) measures the average number of days it takes for a business to collect payment after a sale has been made on credit, indicating the efficiency of its accounts receivable process.
A debenture is a type of debt instrument in which a company borrows money without pledging any specific assets as collateral. It's essentially a promise to repay based on the company's general creditworthiness.
Debits and Credits are the fundamental entries used in double-entry bookkeeping to record every financial transaction, ensuring that a company's accounting equation remains balanced.
The Debt Ratio is a financial metric that measures the proportion of a company's assets financed by debt, indicating its ability to cover its liabilities.
Debt Service Coverage Ratio — definition, examples, related terms, and FAQs.
The Debt-to-Asset Ratio measures the proportion of a company's assets financed by debt, indicating its financial leverage and long-term solvency.
The Debt-to-Equity Ratio is a financial metric that compares a company's total liabilities to its shareholder equity, indicating how much debt is used to finance assets relative to the value of shareholders' investments.
Declining Balance Depreciation is an accelerated depreciation method that allocates a larger portion of an asset's cost to the early years of its useful life, resulting in higher deductions initially.
The Defensive Interval Ratio indicates how many days a business can operate using only its quick assets to cover daily operating expenses, without needing cash from sales or financing.
Deferred Compensation — definition, examples, related terms, and FAQs.
Deferred Revenue — definition, examples, related terms, and FAQs.
Deferred revenue recognition is an accounting method where money received for goods or services not yet delivered is initially recorded as a liability and only recognized as earned income when the service or product is provided.
Deferred Revenue Waterfall — definition, examples, related terms, and FAQs.
Deferred Tax Assets — definition, examples, related terms, and FAQs.
Deferred Tax Liability represents future tax payments a business owes, often because certain income or expense items are recognized differently for financial reporting versus tax purposes, leading to a temporary difference.
A Definitive Agreement is a legally binding contract that outlines the complete terms and conditions of a merger, acquisition, or other significant business transaction, marking the official end of negotiations.
The Dependent Care Credit is a nonrefundable tax credit that helps cover a portion of qualified expenses paid for the care of a qualifying individual, allowing you to work or look for work.
Dependent Exemption was a tax deduction taxpayers could claim for themselves, their spouse, and qualifying dependents. This exemption reduced taxable income until it was eliminated by the Tax Cuts and Jobs Act of 2017 for tax years 2018 through 2025.
Depletion — definition, examples, related terms, and FAQs.
Depletion Allowance — definition, examples, related terms, and FAQs.
A Deposit in Transit is money a business has received and recorded in its books, but the bank has not yet credited to the business's account, creating a temporary difference.
Deposits and Advances — definition, examples, related terms, and FAQs.
Depreciable Base — definition, examples, related terms, and FAQs.
Depreciation is an accounting method that spreads the cost of a tangible asset over its useful life, rather than expensing the entire cost in the year it was purchased.
Depreciation Expense — definition, examples, related terms, and FAQs.
Depreciation Recapture — definition, examples, related terms, and FAQs.
Detection Risk — definition, examples, related terms, and FAQs.
Detective Controls — definition, examples, related terms, and FAQs.
Diluted EPS measures a company's profitability per share, assuming all convertible securities like stock options and convertible bonds are exercised, potentially reducing earnings per share.
A Direct Cash Forecast is a detailed financial tool that projects future cash receipts and disbursements for a business, helping predict its short-term cash position day-by-day or week-by-week.
Direct costing, also called variable costing, is an accounting method that includes only variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) as product costs, treating fixed manufacturing overhead as a period expense.
Direct deposit is an electronic payment method where funds are transferred directly from an employer’s bank account into an employee’s designated bank account, eliminating physical checks.
Direct Labor is the cost of wages paid to employees who directly work on manufacturing a product or providing a service. It's a critical component of a product's prime cost and a key factor in managerial accounting decisions.
Direct Labor Variance measures the difference between what a business expected to pay for labor to produce a product or service and what it actually paid.
Direct Materials are the primary raw materials that become a physical part of a finished product and can be directly and easily traced to that product.
Direct Materials Variance — definition, examples, related terms, and FAQs.
The Direct Method Cash Flow statement reports a company's cash inflows and outflows from operating activities by listing actual cash receipts and cash payments, offering a clear picture of where cash comes from and where it goes.
Disclaimer of Opinion — definition, examples, related terms, and FAQs.
Discontinued operations refers to a part of a business that has been disposed of or classified as held for sale, representing a separate major line of business or geographical area of operation, and its results are reported separately on the income statement.
A discount bond is a bond that is currently trading in the market for less than its face value (par value). This happens when the bond's stated interest rate (coupon rate) is lower than the prevailing market interest rates.
Discount Rate — definition, examples, related terms, and FAQs.
Discounted Cash Flow (DCF) is a valuation method used to estimate the value of an investment based on its expected future cash flows, discounted back to the present day.
Disregarded Entity — definition, examples, related terms, and FAQs.
A Distribution Waterfall is a structured method for allocating profits, losses, and cash flow among investors and partners in a business venture, often used in private equity, real estate, and hedge funds.
A Dividend Aristocrat is a company that has increased its regular dividend payouts to shareholders for at least 25 consecutive years, demonstrating financial strength and a commitment to returning capital.
The Dividend Payout Ratio is a financial metric that shows the percentage of a company's net income that is paid out to shareholders as dividends, rather than being retained for reinvestment.
Dividend Yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price, expressed as a percentage. It measures the return on investment from dividends alone.
Dividends Payable is the amount of money a company owes to its shareholders in declared dividends that have not yet been paid. It's a short-term liability on the balance sheet.
Document Management System — definition, examples, related terms, and FAQs.
Doing Business As — definition, examples, related terms, and FAQs.
Donor-Restricted Contribution — definition, examples, related terms, and FAQs.
Double-entry bookkeeping is an accounting system where every financial transaction is recorded in at least two accounts, with equal and opposite entries of debits and credits, ensuring the fundamental accounting equation always remains balanced.
A Down Round occurs when a company raises capital at a lower valuation than its previous funding round, often diluting existing shareholders and impacting employee equity.
Drag-Along Rights — definition, examples, related terms, and FAQs.
A Drawing Account tracks money or assets an owner takes out of a business for personal use, directly reducing their capital or equity in the business. It’s primarily used in sole proprietorships and partnerships.
Due Diligence — definition, examples, related terms, and FAQs.
Duration — definition, examples, related terms, and FAQs.
Earn-Out — definition, examples, related terms, and FAQs.
Earned Income Tax Credit — definition, examples, related terms, and FAQs.
Earnings Per Share (EPS) measures a company's profit allocated to each outstanding share of common stock, indicating its profitability on a per-share basis.
EBIT, or Earnings Before Interest and Taxes, is a financial metric that shows a company's profitability from its primary operations before considering the impact of debt financing costs and income taxes.
EBITDA — definition, examples, related terms, and FAQs.
EBITDA Multiple — definition, examples, related terms, and FAQs.
EBITDAR — definition, examples, related terms, and FAQs.
The Economic Entity Assumption means you must keep your business financial activities completely separate from your personal financial activities. It ensures your business's financial health is reported accurately, without personal funds muddying the waters.
Economic Nexus is a sales tax principle where a business must collect and remit sales tax in a state if it meets certain revenue or transaction thresholds, even without a physical presence.
Economic Order Quantity (EOQ) is an inventory management formula that helps businesses determine the ideal order size to minimize total inventory costs, including holding costs and ordering costs.
Economic Value Added (EVA) is a financial performance measure that shows a company's true economic profit by subtracting the cost of its capital from its net operating profit after taxes.
Effective Interest Method — definition, examples, related terms, and FAQs.
Effective tax rate is the actual percentage of income a business pays in taxes after accounting for all deductions, credits, and preferential rates, providing a truer picture of its overall tax burden.
Efficiency Variance — definition, examples, related terms, and FAQs.
The Efficient Frontier identifies a set of optimal investment portfolios that offer the highest expected return for a given level of risk, or the lowest risk for a given expected return.
EIN — definition, examples, related terms, and FAQs.
The Electric Vehicle Tax Credit is a nonrefundable federal tax credit designed to encourage the purchase of new and previously owned clean vehicles by offering a reduction in the tax liability of qualifying individuals and businesses.
The Emerging Issues Task Force (EITF) is a group under the Financial Accounting Standards Board (FASB) that helps quickly address new financial reporting issues, ensuring consistent application of accounting principles.
Employee classification is the process of categorizing workers as either employees or independent contractors. This distinction is crucial for determining tax obligations, withholding requirements, and compliance with labor laws for businesses.
Employee Stock Purchase Plan — definition, examples, related terms, and FAQs.
An employer matching contribution is money an employer adds to an employee's retirement account (like a 401(k) plan) based on the employee's own contributions, often up to a certain percentage of their pay.
Employer Payroll Taxes are mandatory contributions by employers to federal and state governments based on their employees' wages, funding social security, Medicare, and unemployment benefits.
An endowment is a fund of money or other financial assets donated to an institution, often a nonprofit, with the principal invested to provide a perpetual stream of income for a specific purpose.
Engagement Letter — definition, examples, related terms, and FAQs.
Enterprise Resource Planning — definition, examples, related terms, and FAQs.
Enterprise Value — definition, examples, related terms, and FAQs.
Environmental liability is a business's obligation to clean up past or present environmental damage, or to pay for future actions to prevent such damage, often related to pollution, hazardous waste, or non-compliance with regulations.
Equipment — definition, examples, related terms, and FAQs.
Equity represents the owner's stake in a business, calculated as assets minus liabilities, reflecting the net worth or residual value of the company.
The Equity Method is an accounting technique used when an investor company holds significant influence over an investee company, typically owning 20% to 50% of its voting stock, allowing the investor to report its share of the investee's net income or loss on its own financial statements.
Equity Multiplier — definition, examples, related terms, and FAQs.
Escrow Account — definition, examples, related terms, and FAQs.
Escrow holdback is a portion of a business acquisition's purchase price held aside by a third party, typically to cover potential future liabilities or unfulfilled obligations of the seller.
Escrowed Funds — definition, examples, related terms, and FAQs.
Estate Tax — definition, examples, related terms, and FAQs.
Estimated Tax — definition, examples, related terms, and FAQs.
Estimated Tax Vouchers — definition, examples, related terms, and FAQs.
Ex-Dividend Date — definition, examples, related terms, and FAQs.
An Exchange-Traded Fund (ETF) is an investment vehicle that holds assets like stocks, bonds, or commodities, and trades on stock exchanges throughout the day, similar to individual stocks.
An Excise Tax is a special tax on the production or sale of certain goods or services, often added to the price and paid by the consumer, but collected by the producer or seller.
Expense Management Software is a digital tool that automates the process of tracking, reporting, and reimbursing employee expenses, helping businesses control spending, maintain compliance, and gain real-time financial insights.
Expense Recognition is an accounting rule that says you should record expenses in the same period you earn the revenue they helped create, giving you a clear picture of profit.
An External Audit is an independent examination of a company's financial statements by an outside accounting firm to confirm they are presented fairly and accurately, free from material misstatement.
Extraordinary Items — definition, examples, related terms, and FAQs.
Fair Market Value (FMV) is the price an asset would sell for in an open and unrestricted market, between a willing buyer and a willing seller, neither of whom is under any compulsion to buy or sell, and both having reasonable knowledge of relevant facts.
Fair presentation means financial statements accurately and reliably reflect a company's financial position, performance, and cash flows, adhering to accounting standards for transparency and completeness.
Fair Value in accounting is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Fair Value Hierarchy is an accounting framework that categorizes inputs used to measure the fair value of assets and liabilities into three levels, based on reliability and observability.
Fairness Opinion — definition, examples, related terms, and FAQs.
Faithful representation means that financial information is complete, neutral, and free from error, making it truly reflect the economic reality of a business without bias.
The Financial Accounting Standards Board (FASB) is a private, non-profit organization that sets accounting standards, known as GAAP, for public and private companies in the United States.
FATCA — definition, examples, related terms, and FAQs.
Favorable Variance — definition, examples, related terms, and FAQs.
FBAR Reporting — definition, examples, related terms, and FAQs.
Federal Employer Identification Number — definition, examples, related terms, and FAQs.
Federal Unemployment Tax (FUTA) is a payroll tax employers pay based on employee wages to fund unemployment benefits for workers who have lost their jobs. It's a key part of the federal-state unemployment insurance program.
FICA stands for the Federal Insurance Contributions Act, which is a U.S. federal law requiring employers and employees to contribute to Social Security and Medicare through payroll taxes.
Fiduciary duty is a legal and ethical obligation requiring an individual to act in the best interests of another party, especially regarding financial matters, prioritizing their welfare above their own.
Finance Lease — definition, examples, related terms, and FAQs.
Financial Forecasting — definition, examples, related terms, and FAQs.
The Financial Leverage Ratio indicates how much of a company's assets are financed by debt, measuring a company's reliance on borrowed money to fund its operations and growth.
Financial Statement Audit — definition, examples, related terms, and FAQs.
Financial Statement Fraud involves intentionally misrepresenting a company's financial health on its official reports, usually to deceive investors, lenders, or regulators, and often for personal gain.
Financing Activities show how a business raises money from owners and lenders, and how it pays them back, detailing capital movements on the cash flow statement.
Finished Goods Inventory refers to products that have completed the manufacturing process and are ready for sale to customers, representing a key asset on a company's balance sheet.
First In First Out — definition, examples, related terms, and FAQs.
A fiscal year is a 12-month accounting period that businesses use for financial reporting and tax purposes, which doesn't always have to align with the standard calendar year.
Fixed Asset Turnover — definition, examples, related terms, and FAQs.
Fixed assets are long-term tangible items a business owns and uses to generate income, not intending to sell them in the near future. They are also known as property, plant, and equipment (PP&E).
Fixed Charge Coverage Ratio — definition, examples, related terms, and FAQs.
Fixed Costs — definition, examples, related terms, and FAQs.
A flat tax is a tax system where all income, regardless of amount, is taxed at a single, consistent rate. It applies the same percentage to everyone's taxable income, differing from progressive systems where rates increase with income.
A Flexible Budget adjusts projected revenues and costs based on actual activity levels. Unlike a static budget, it provides a more realistic financial picture by adapting to changes in sales volume or production output, making performance evaluation more accurate.
Flexible Spending Account — definition, examples, related terms, and FAQs.
FOB Destination — definition, examples, related terms, and FAQs.
FOB Shipping Point — definition, examples, related terms, and FAQs.
The Foreign Earned Income Exclusion (FEIE) allows qualifying U.S. citizens or resident aliens who live and work abroad to exclude a certain amount of their foreign earnings from U.S. taxation.
Foreign Qualification is the legal process a business entity undergoes to register and obtain authorization to conduct business legally in a state or jurisdiction where it was not originally formed.
The Foreign Tax Credit is a nonrefundable credit that allows U.S. taxpayers, including small businesses, to reduce their U.S. income tax liability on income earned in foreign countries, to prevent double taxation.
Forensic Accounting — definition, examples, related terms, and FAQs.
Form 1065, U.S. Return of Partnership Income, is an annual informational tax return filed by partnerships to report their income, gains, losses, deductions, and credits to the IRS, but it does not pay tax itself.
Form 1099-B, "Proceeds From Broker and Barter Exchange Transactions," is an IRS information return that reports the proceeds from sales of stocks, bonds, commodities, and other property, as well as certain barter exchange transactions.
Form 1099-DIV, officially 'Dividends and Distributions,' is an IRS information return that reports various types of income from dividends and other distributions paid to you by investment companies and other payers.
Form 1099-G, Certain Government Payments, is an IRS tax document reporting various payments received from government entities, like unemployment compensation or state tax refunds, which might be taxable income.
Form 1099-INT, officially called 'Interest Income,' is an IRS information return used to report various types of interest income paid to you or your business, helping the IRS track taxable income.
Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., reports distributions from retirement accounts, annuities, and other plans to both the IRS and the recipient.
Form 1099-S — definition, examples, related terms, and FAQs.
Form 1120 — definition, examples, related terms, and FAQs.
Form 1120-S, U.S. Income Tax Return for an S Corporation, is the federal income tax form used by S corporations to report their income, losses, deductions, credits, and other financial data to the IRS.
Form 2553, Election by a Small Business Corporation, is used by eligible domestic corporations to elect S-corporation status for federal income tax purposes.
Form 4868 — definition, examples, related terms, and FAQs.
Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, is an IRS document used by U.S. citizens and residents, domestic partnerships, and domestic corporations with ownership or control interests in certain foreign corporations.
Form 5472 — definition, examples, related terms, and FAQs.
Form 7004 — definition, examples, related terms, and FAQs.
Form 8300 — definition, examples, related terms, and FAQs.
Form 8832 — definition, examples, related terms, and FAQs.
Form 8858 — definition, examples, related terms, and FAQs.
Form 8865, "Information Return of U.S. Persons With Respect to Certain Foreign Partnerships," reports ownership and financial activities in foreign partnerships to the IRS.
Form 940 — definition, examples, related terms, and FAQs.
Form 941, the Employer's QUARTERLY Federal Tax Return, is used by businesses to report income taxes, Social Security tax, and Medicare tax withheld from employee paychecks, plus the employer's share of Social Security and Medicare taxes.
Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, is used by employers to correct errors on a previously filed Form 941, Employer's Quarterly Federal Tax Return.
Form 990 — definition, examples, related terms, and FAQs.
Form SS-4 — definition, examples, related terms, and FAQs.
Franchises, in accounting, represent an intangible asset acquired by a business conferring the right to operate a specific business model under a franchisor's trade name and system for a set period or perpetually.
Fraud Triangle — definition, examples, related terms, and FAQs.
Free Cash Flow is the cash a business generates after paying for operating expenses and capital expenditures, showing the money available to pay down debt, distribute to owners, or reinvest.
Free Cash Flow to Equity — definition, examples, related terms, and FAQs.
Free Cash Flow to Firm (FCFF) represents the cash generated by a business's operations that is available to all its capital providers (both debt and equity holders) before any debt payments.
Freight-In — definition, examples, related terms, and FAQs.
Freight-Out — definition, examples, related terms, and FAQs.
FreshBooks is a cloud-based accounting software specifically designed for small business owners and self-employed professionals to manage invoicing, expenses, time tracking, and payments efficiently.
Fringe benefits are forms of pay for the performance of services, provided by an employer to an employee, in addition to regular wages or salary. They can be taxable or nontaxable, impacting both the employee’s and employer's tax situations.
The Full Disclosure Principle requires businesses to report all information relevant to financial statement users, even if it's not a specific number, ensuring transparency and informed decision-making.
Full-Charge Bookkeeper — definition, examples, related terms, and FAQs.
Fully Diluted Shares — definition, examples, related terms, and FAQs.
Fund Accounting — definition, examples, related terms, and FAQs.
Fund of Funds — definition, examples, related terms, and FAQs.
Fundraising Expense — definition, examples, related terms, and FAQs.
Furniture and Fixtures — definition, examples, related terms, and FAQs.
GAAP — definition, examples, related terms, and FAQs.
GDS Depreciation, or the General Depreciation System, is the primary method for calculating depreciation deductions on most business property for US tax purposes under the Modified Accelerated Cost Recovery System (MACRS). It allows businesses to recover the cost of certain assets over their useful life through annual deductions.
General and Administrative Expenses are the costs a business incurs that are not directly tied to making a product or service, but are necessary for the day-to-day operation and management of the company.
A General Journal is the initial accounting record where every financial transaction of a business is first recorded, in chronological order, using the double-entry bookkeeping system.
The General Ledger is the master record of all financial transactions within a business. It organizes all accounts like cash, receivables, sales, and expenses, providing a complete financial picture.
General Partner — definition, examples, related terms, and FAQs.
A General Partnership is a business structure where two or more individuals agree to share in all assets, profits, and liabilities of a business. It's often simple to set up but comes with shared responsibility for each partner's actions.
Gift Tax — definition, examples, related terms, and FAQs.
Global Intangible Low-Taxed Income (GILTI) is a US tax provision designed to ensure that certain foreign earnings of US controlled foreign corporations are subject to US taxation, even if those earnings are not distributed back to the US.
Going Concern is the accounting assumption that a business will continue to operate and meet its obligations for the foreseeable future, usually at least 12 months, without the need to liquidate its assets.
A Going Concern Opinion is an auditor's evaluation of a business's ability to continue operating for at least one year. It signals potential financial difficulties if doubts arise, impacting business decisions and investor confidence.
Goodwill is an intangible asset representing the value of a business beyond its separable, identifiable assets and liabilities, often arising from an acquisition.
Goodwill Allocation — definition, examples, related terms, and FAQs.
Goodwill Impairment — definition, examples, related terms, and FAQs.
Graded Vesting — definition, examples, related terms, and FAQs.
Grant Accounting — definition, examples, related terms, and FAQs.
Gross Margin — definition, examples, related terms, and FAQs.
Gross Pay is the total amount of money an employee earns before any deductions or taxes are withheld. It represents the full earnings for their work during a specific pay period.
Gross Profit is the money a business has left from sales after paying for the direct costs of making or buying the goods it sells. It's a crucial measure of operational efficiency before other expenses are factored in.
Gross Profit Margin — definition, examples, related terms, and FAQs.
Gross Revenue is the total amount of money a business earns from its sales of goods or services before any costs, returns, or allowances are subtracted.
Gross Revenue Retention (GRR) measures the percentage of recurring revenue a business retains from its existing customers over a specific period, excluding any new revenue from upgrades or new sales, focusing solely on preventing churn and downgrades.
Growth Stock — definition, examples, related terms, and FAQs.
The Half-Year Convention is an IRS rule that treats all property placed in service or disposed of during any tax year as placed in service or disposed of at the midpoint of that tax year. It simplifies depreciation calculations for many business assets.
Head of Household is a tax filing status that often provides a larger standard deduction and more favorable tax rates than the Single or Married Filing Separately statuses.
A Health Savings Account (HSA) is a tax-advantaged savings and investment account used in conjunction with a High-Deductible Health Plan (HDHP) to pay for qualified medical expenses.
Hedge Fund — definition, examples, related terms, and FAQs.
Held-to-Maturity Securities are debt investments that a company has the positive intent and ability to hold until their maturity date, recorded at amortized cost on the balance sheet.
The Historical Cost Convention dictates that assets are recorded at their original purchase price on financial statements, not their current market value, providing a reliable and verifiable basis for accounting.
The Historical Cost Principle dictates that assets should be recorded at their original purchase price, or cost, at the time of acquisition. This principle prioritizes verifiable and objective financial data over fluctuating estimations.
Hurdle Rate — definition, examples, related terms, and FAQs.
The International Accounting Standards Board (IASB) is an independent private-sector body that develops and approves International Financial Reporting Standards (IFRS), which are used by companies in over 140 jurisdictions globally.
Idle Assets — definition, examples, related terms, and FAQs.
Idle Time Variance — definition, examples, related terms, and FAQs.
IFRS, or International Financial Reporting Standards, is a global set of accounting rules designed to bring consistency and transparency to financial statements across different countries.
IFRS 15, or International Financial Reporting Standard 15, is an international accounting standard that dictates how and when a business should recognize revenue from contracts with customers.
IFRS 16 is an international accounting standard that dictates how organizations account for leases, requiring most leases to be recognized on the balance sheet as both a 'right-of-use' asset and a lease liability.
IFRS 9 is an international accounting standard that outlines how companies classify, measure, and account for financial instruments, focusing on a forward-looking expected credit loss model.
Impairment — definition, examples, related terms, and FAQs.
Impairment Expense — definition, examples, related terms, and FAQs.
An In-Kind Contribution is a donation of goods, services, or property rather than cash, which nonprofits must value and report accurately for financial transparency and tax purposes.
Incentive Stock Options (ISOs) are a type of stock option granted to employees that offer potential tax advantages upon exercise and sale, provided specific IRS rules are followed.
An Income Statement, also known as a Profit and Loss (P&L) statement, summarizes a company's revenues, expenses, and profits or losses over a specific period, showing its financial performance.
Income Tax — definition, examples, related terms, and FAQs.
Income Tax Payable — definition, examples, related terms, and FAQs.
Incremental Borrowing Rate — definition, examples, related terms, and FAQs.
Incremental Budgeting — definition, examples, related terms, and FAQs.
An indemnification cap is a contractual limit on the maximum amount a seller in an M&A transaction may be required to pay the buyer for breaches of representations, warranties, or covenants.
Independence Standards are a set of rules and principles that prevent Accounting & Tax Professionals from having financial or other conflicts of interest when providing audit and assurance services, ensuring objectivity and unbiased reporting.
Independent Contractor — definition, examples, related terms, and FAQs.
An Index Fund is a type of mutual fund or exchange-traded fund (ETF) designed to match the performance of a specific market index, like the S&P 500, by holding the same securities in similar proportions.
The Indirect Method Cash Flow statement starts with net income and adjusts it for non-cash items and changes in working capital to show actual cash generated or used by a business's operations.
Inherent Risk — definition, examples, related terms, and FAQs.
Installment Sales Method — definition, examples, related terms, and FAQs.
Insurance expense is the cost a business incurs for its various insurance policies like property, liability, or health insurance, recognized over the period the coverage applies.
Intangible amortization is the process of spreading the cost of certain intangible assets over their useful life, similar to how depreciation works for physical assets, reducing taxable income over time.
Intangible assets are non-physical business resources that add significant value to a company, such as patents, copyrights, trademarks, goodwill, and customer lists.
Intercompany transactions are financial dealings that occur between two or more related entities within the same larger organization. These often involve sales, loans, or services shared among subsidiaries or divisions.
The Interest Coverage Ratio measures a company's ability to pay its interest expenses on outstanding debt using its earnings before interest and taxes (EBIT). It's a crucial liquidity and solvency metric for small businesses.
Interest expense is the cost a business pays for borrowing money. It's the fee charged by a lender for using their funds, impacting a company's net income and tax obligations.
Interest Payable is the amount of interest a business owes but has not yet paid on its outstanding debts or loans by the end of an accounting period.
Interim Financial Statements are reports that summarize a company's financial performance and position over a period shorter than a full fiscal year, like a month or quarter, offering timely insights into business health.
Internal Audit is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations, helping it accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.
An Internal Control Framework is a system of rules, processes, and procedures implemented by a business to help it achieve its operational, reporting, and compliance objectives while safeguarding assets.
Internal Controls — definition, examples, related terms, and FAQs.
Internal Rate of Return — definition, examples, related terms, and FAQs.
Inventory refers to the goods a business holds for sale, materials used in production, or goods in the process of being manufactured. It is classified as a current asset on the balance sheet and is crucial for income calculation.
Inventory Shrinkage — definition, examples, related terms, and FAQs.
Inventory Turnover — definition, examples, related terms, and FAQs.
Inventory Write-Down — definition, examples, related terms, and FAQs.
Investing Activities refers to the section of a company's cash flow statement that reports the cash used to purchase or sell assets like property, equipment, or investments, showing how a business is spending or generating cash through long-term asset decisions.
Investment Grade — definition, examples, related terms, and FAQs.
Investment Property — definition, examples, related terms, and FAQs.
Invoice Automation — definition, examples, related terms, and FAQs.
IPO — definition, examples, related terms, and FAQs.
The IRS, or Internal Revenue Service, is the US federal government agency responsible for collecting taxes and administering the Internal Revenue Code. It ensures businesses and individuals meet their tax obligations.
Issued Shares — definition, examples, related terms, and FAQs.
Itemized Deduction — definition, examples, related terms, and FAQs.
An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the IRS to individuals who are required to have a U.S. taxpayer identification number but do not have, and are not eligible to obtain, a Social Security number (SSN).
Job Order Costing — definition, examples, related terms, and FAQs.
A journal entry is the first step in the accounting cycle, recording every financial transaction of a business in chronological order, showing which accounts are debited and credited.
A junk bond, also known as a high-yield bond, is a debt instrument issued by companies or governments with lower credit ratings, offering higher interest rates to compensate investors for increased risk of default.
Just-In-Time (JIT) inventory is an inventory management strategy where materials or products are ordered and received only as they are needed for production or sale, rather than holding large quantities in advance.
Kaizen Costing is a cost reduction strategy focusing on continuous, small improvements to processes and products throughout their lifecycle, aiming to meet predetermined target costs.
Kiddie Tax — definition, examples, related terms, and FAQs.
Kiting Fraud — definition, examples, related terms, and FAQs.
Land, in accounting, refers to real estate held primarily for its permanent value as a capital asset, distinct from any buildings or improvements on it. It’s a non-depreciable asset recorded at its historical cost.
Landed Cost — definition, examples, related terms, and FAQs.
Lapping Scheme — definition, examples, related terms, and FAQs.
A large cap stock represents ownership in a company with a significant market capitalization, typically over
Last In First Out (LIFO) is an inventory costing method that assumes the most recently purchased inventory items are the first ones sold, affecting cost of goods sold and ending inventory values.
Lean Accounting — definition, examples, related terms, and FAQs.
The Lease Commencement Date is the day a lessee (the party using an asset through a lease) first gains control of a leased asset, marking the official start of the lease term for accounting and reporting purposes.
Lease Discount Rate — definition, examples, related terms, and FAQs.
Lease Liability — definition, examples, related terms, and FAQs.
Lease Modification — definition, examples, related terms, and FAQs.
Lease Term — definition, examples, related terms, and FAQs.
Leasehold Improvements — definition, examples, related terms, and FAQs.
Letter of Intent — definition, examples, related terms, and FAQs.
Level 1 Inputs are direct, unadjusted quoted prices in active markets for identical assets or liabilities that an entity can access at the measurement date, representing the most reliable fair value measurement.
Level 2 Inputs — definition, examples, related terms, and FAQs.
Level 3 Inputs — definition, examples, related terms, and FAQs.
Levered Free Cash Flow (LFCF) represents the cash a business has left over after paying all its operating expenses, capital expenditures, and interest on debt, which is then available to distribute to equity holders.
Liabilities — definition, examples, related terms, and FAQs.
Liability recognition is the process of formally recording an obligation that a business owes to another party, ensuring these debts are accurately reflected on its financial statements at the time they are incurred.
Life Cycle Costing is an approach that considers all costs associated with a product, service, or asset throughout its entire lifespan, from design through disposal, to make informed long-term decisions.
Lifetime Learning Credit — definition, examples, related terms, and FAQs.
Like-Kind Exchange — definition, examples, related terms, and FAQs.
A Limited Liability Company (LLC) is a type of US business entity that combines aspects of a corporation and a partnership or sole proprietorship, offering personal liability protection to owners while allowing pass-through taxation.
Limited Liability Partnership — definition, examples, related terms, and FAQs.
A Limited Partner is an investor in a limited partnership (LP) or limited liability partnership (LLP) whose liability for business debts is capped at the amount of their capital contribution, without active management involvement.
Limited Partnership — definition, examples, related terms, and FAQs.
A Line of Credit is a flexible loan arrangement allowing a business to draw funds up to a set limit, repay, and redraw, often used for working capital or unexpected expenses.
Liquidation preference is a contractual right for investors in a company to receive their investment back, and sometimes a multiple of it, before common shareholders receive any proceeds during a liquidation event.
A Litigation Reserve is an estimated amount of money a business sets aside to cover potential future costs arising from lawsuits or legal claims that are probable and can be reasonably estimated.
Loans Payable represents the total amount of money your business owes to lenders, like banks or financial institutions, that needs to be paid back over time, forming a key part of your company's liabilities.
Location Tracking — definition, examples, related terms, and FAQs.
Lockbox banking is a treasury management service where a business authorizes its bank to receive customer payments directly into a special Post Office box, process them, and deposit the funds into the business's account, speeding up cash flow.
Long-Term Capital Gains — definition, examples, related terms, and FAQs.
Long-Term Debt to Capitalization measures the proportion of a company's long-term debt compared to its total capital structure, indicating reliance on long-term borrowing.
Long-Term Debt to Equity is a financial ratio that compares a company's long-term liabilities to its shareholder equity, indicating its reliance on debt financing versus owner investment.
Long-Term Investments are assets a company intends to hold for more than one year, typically for capital appreciation, income generation, or strategic influence over another entity.
Long-term liabilities are financial obligations your business owes that won't be settled within one year or one operating cycle, whichever is longer. They represent debts that will be repaid over an extended period.
The Low-Value Lease Exemption allows businesses to avoid detailed accounting for leases of assets with a value below a certain threshold, typically simplifying financial reporting.
Lower of Cost or Market (LCM) is an inventory accounting principle requiring businesses to value their inventory at the lower of its historical cost or its current market value, preventing overstatement of assets.
Lower of Cost or Net Realizable Value (LCNRV) is an accounting principle requiring businesses to value inventory at either its original cost or its current estimated selling price minus direct selling costs, whichever is lower.
The LTV to CAC Ratio compares the total revenue a business expects to earn from a customer over their lifetime to the cost of acquiring that customer, showing marketing efficiency and customer profitability.
Machinery refers to long-term assets used in business operations to produce goods or services, not intended for immediate sale. These assets are subject to depreciation, reflecting their gradual loss of value over time.
MACRS — definition, examples, related terms, and FAQs.
Management and General Expense in nonprofit accounting covers overhead costs not directly tied to program services or fundraising, such as administrative salaries, office rent, and accounting fees.
Management Fee — definition, examples, related terms, and FAQs.
Management Letter — definition, examples, related terms, and FAQs.
Managerial accounting uses internal financial data to help businesses make better decisions about planning, operations, and control, focusing on the future rather than historical reporting.
Manufacturing overhead refers to all indirect costs related to producing goods in a factory, excluding direct materials and direct labor, such as factory rent, utilities, and supervisors' salaries.
The Margin of Safety is the amount by which actual or projected sales exceed the break-even point, indicating how much sales can drop before a business starts losing money.
Marginal Costing — definition, examples, related terms, and FAQs.
Marginal Tax Rate — definition, examples, related terms, and FAQs.
Market Capitalization, or 'market cap,' is the total dollar value of a company's outstanding shares, calculated by multiplying the current share price by the total number of shares available.
Market Risk Premium is the extra return investors expect to earn from investing in the stock market compared to a risk-free investment, compensating for additional risk.
Marketable Securities — definition, examples, related terms, and FAQs.
Marketing Expense — definition, examples, related terms, and FAQs.
Married Filing Jointly (MFJ) is a tax filing status for married couples who choose to combine their incomes and deductions on a single tax return, often resulting in tax savings and simplified filing.
Married Filing Separately is an IRS tax filing status available to married individuals who choose to report their income, deductions, and credits on separate tax returns.
A Master Budget is a comprehensive financial and operational plan that combines all individual budgets of a business into one cohesive framework, guiding future activities and performance for a specific period.
The Matching Principle is an accounting rule that requires businesses to record expenses in the same accounting period as the revenues they helped generate, providing a clear picture of profitability for that specific period.
Materiality in accounting refers to an item's significance in influencing the decisions of financial statement users. An omission or misstatement is material if it could reasonably alter overall financial perceptions.
A materiality scrape is a provision in a mergers and acquisitions (M&A) deal that removes the 'materiality' qualifier from certain representations and warranties, making breaches easier to claim and often recoverable without meeting a higher threshold.
Materiality threshold is the breaking point where an accounting error or omission becomes significant enough to influence the decisions of financial statement users, guiding auditors and financial preparers.
Medicare Tax is a federal payroll tax funding the Medicare program, which provides health insurance for individuals generally aged 65 or older, and younger people with certain disabilities. Employers and employees typically share the cost.
Member Interest represents an owner's share in a Limited Liability Company (LLC), encompassing their capital contributions, profit-sharing rights, voting power, and specific liabilities as outlined in the operating agreement.
Members' Equity represents the residual interest in the assets of a limited liability company (LLC) or partnership after deducting liabilities. It shows what the owners have invested and accumulated earnings.
A merchant account is a specialized bank account that allows businesses to accept and process electronic payments, primarily credit and debit cards, from customers.
Mergers and Acquisitions — definition, examples, related terms, and FAQs.
Mezzanine Financing — definition, examples, related terms, and FAQs.
Mid Cap Stock — definition, examples, related terms, and FAQs.
The Mid-Month Convention is an accounting rule used primarily for depreciating real property (like buildings), assuming all property placed in service or disposed of during any month was placed in service or disposed of uniformly in the middle of that month, affecting the first and last year's depreciation deduction.
The Mid-Quarter Convention is an IRS depreciation rule that applies if more than 40% of your business personal property is purchased and placed in service during the last three months of the tax year.
Milestone Method — definition, examples, related terms, and FAQs.
Mineral Rights grant ownership of subterranean resources like oil, gas, and coal beneath a property, separate from surface land ownership, and are treated as a distinct asset for accounting and tax purposes.
Minority Interest — definition, examples, related terms, and FAQs.
Mix Variance — definition, examples, related terms, and FAQs.
Mixed Costs — definition, examples, related terms, and FAQs.
Modified Accelerated Cost Recovery System (MACRS) is the primary method for tax depreciation in the U.S., allowing businesses to deduct the cost of certain tangible property over set periods to reduce taxable income.
Modified Adjusted Gross Income (MAGI) is a version of Adjusted Gross Income (AGI) that includes certain tax-exempt or tax-deductible items back into your income for specific tax calculation purposes, often impacting eligibility for various deductions, credits, and programs.
Modified Cash Basis is an accounting method that combines elements of both cash basis and accrual basis accounting, recognizing most income when received and most expenses when paid, but capitalizing certain asset purchases and matching specific expenses.
Modified Internal Rate of Return — definition, examples, related terms, and FAQs.
The Monetary Unit Assumption is a fundamental accounting principle stating that only monetary transactions are recorded, and money provides a common measurement unit for all business activities.
Money Market Account — definition, examples, related terms, and FAQs.
Money Order — definition, examples, related terms, and FAQs.
Monte Carlo Simulation — definition, examples, related terms, and FAQs.
Month-End Close — definition, examples, related terms, and FAQs.
Monthly Recurring Revenue — definition, examples, related terms, and FAQs.
Mortgage Payable represents the outstanding balance a business owes on a loan used to buy real estate, typically secured by the property itself. It's a key long-term liability on your balance sheet.
Multi-Entity Accounting — definition, examples, related terms, and FAQs.
A Multi-Step Income Statement is a detailed financial report that breaks down a company's revenues and expenses into several categories to present a clearer picture of profitability at different stages, ultimately showing net income.
A Multiple Element Arrangement involves selling distinct goods or services together in one package, requiring businesses to allocate the total transaction price to each separate item for accurate revenue recognition.
Municipal Bond — definition, examples, related terms, and FAQs.
Mutual Fund — definition, examples, related terms, and FAQs.
Net Cash Flow shows the total money moving in and out of your business over a specific period, revealing if you're gaining or losing cash after all operations, investments, and financing activities.
Net Income — definition, examples, related terms, and FAQs.
A net loss happens when a business's total expenses are more than its total revenues during a specific period. It means the business spent more money than it brought in.
A Net Operating Loss (NOL) happens when a business's allowable tax deductions are greater than its taxable income for a tax year, creating a loss that can potentially be used to offset income in other tax years.
Net Pay — definition, examples, related terms, and FAQs.
Net Present Value (NPV) calculates the current worth of a series of future cash flows, considering the time value of money, to help businesses evaluate potential investments.
Net Profit Margin — definition, examples, related terms, and FAQs.
Net Revenue — definition, examples, related terms, and FAQs.
Net Revenue Retention (NRR) measures the percentage of recurring revenue retained from existing customers over a specific period, including upgrades, downgrades, and churn.
Net Working Capital is the difference between a business's current assets and its current liabilities, indicating its short-term liquidity and operational efficiency.
NetSuite — definition, examples, related terms, and FAQs.
Neutrality in accounting means that financial information is free from bias. It means reporting what's true and fair, without trying to influence a decision or make anything look better or worse than it is.
Nexus, in taxation, is the legally sufficient connection a business has with a state or jurisdiction, triggering a requirement to collect and remit sales tax or pay income tax there.
No par value stock refers to shares issued by a corporation without an assigned minimum legal value per share, offering flexibility in setting the initial issue price.
A No-Shop Clause is a legal provision in a merger and acquisition (M&A) agreement that restricts a seller from soliciting or negotiating with other potential buyers while a primary deal is pending. It helps solidify an existing offer and discourages competitive bidding.
NOL Carryforward allows businesses to use past operating losses to reduce future taxable income, providing a valuable tax shield during profitable years.
A Non-Accountable Plan is an employer-provided reimbursement arrangement where employees don't have to provide substantiation for expenses or return excess advances, treating all payments as taxable wages.
A Non-Compete Agreement is a contract where one party, often an employee or business seller, agrees not to compete with the other party for a specified period within a defined geographic area.
Non-Controlling Interest, also known as minority interest, represents the portion of a subsidiary company's equity that isn't owned by the parent company.
Non-current assets are items a business owns and expects to use, or benefit from, for more than one year, like buildings, machinery, and long-term investments.
Non-Operating Expense — definition, examples, related terms, and FAQs.
Non-operating income refers to earnings a business generates from activities outside its main, regular business operations, showing a complete picture of its financial performance.
Non-Qualified Stock Options — definition, examples, related terms, and FAQs.
Nonprofit Accounting — definition, examples, related terms, and FAQs.
Nonprofit Corporation — definition, examples, related terms, and FAQs.
Nonrefundable Tax Credit — definition, examples, related terms, and FAQs.
Notes Payable represents a formal written promise to repay a specific sum of money, plus interest, at a future date, documenting a borrower's debt to a lender. It's a key liability on a business's balance sheet.
Notes Receivable is a formal, written promise from a debitor to pay a specific amount of money to a business or individual on a future date, often including interest.
Notes to Financial Statements are additional disclosures that provide detailed information and context for figures presented in a company's main financial statements, offering transparency and clarity to readers.
An NSF Check, or Non-Sufficient Funds Check, is a check that cannot be cashed or honored because the account holder does not have enough money in their bank account to cover the amount written on the check.
The Objectivity Principle in accounting means that all financial records and reports must be based on verifiable, unbiased evidence, not personal opinions or estimates.
An Obsolete Inventory Reserve is a contra-asset account used to reduce the reported value of inventory on a company's balance sheet to reflect items that are no longer sellable at full price due to damage, technological advancements, or changing customer tastes.
Occupational fraud involves using one's job for personal gain through the deliberate misuse or misapplication of employer's resources or assets.
Off-balance-sheet financing refers to debt or assets not recorded on a company's balance sheet, typically to keep debt ratios lower and improve perceived financial health.
Operating activities are the core, day-to-day business operations that generate revenue and expenses, like selling products or services, paying employees, and managing inventory.
An Operating Agreement is a foundational legal document for Limited Liability Companies (LLCs) that outlines the business's financial and functional decisions, including rules, regulations, and provisions.
Operating Budget — definition, examples, related terms, and FAQs.
Operating Cash Flow, often called OCF, is the money a business generates from its routine, day-to-day operations before considering investments or financing activities. It's a key indicator of a company's ability to create cash internally.
The Operating Cash Flow (OCF) ratio measures a company's ability to cover its current liabilities with the cash generated from its normal business operations, indicating short-term liquidity and financial health.
Operating expenses are the costs a business incurs from its normal day-to-day activities to generate revenue, excluding the direct costs of goods sold.
Operating Income — definition, examples, related terms, and FAQs.
Operating Lease — definition, examples, related terms, and FAQs.
Operating lease liability is the total financial obligation a business has for its operating leases, recognized on the balance sheet under new accounting rules to show the true cost of using rented assets.
Operating leverage shows how much a company's operating income changes in response to a change in sales revenue, highlighting the impact of fixed costs on profit volatility.
Operating Margin is a key profitability metric that shows how much profit a company makes from its core business operations for every dollar of sales, after covering direct costs and operational expenses but before taxes and interest.
Optical Character Recognition — definition, examples, related terms, and FAQs.
Option Pool — definition, examples, related terms, and FAQs.
Other Comprehensive Income (OCI) includes gains and losses that bypass the income statement but are still part of a company's total financial performance, often related to asset revaluations or certain hedging activities.
Other income refers to revenue generated by a business that is outside of its primary operations, such as interest earned on savings, gains from selling assets, or rental income from unused property.
Outstanding Check — definition, examples, related terms, and FAQs.
Outstanding shares represent all the shares of a company's stock currently held by investors, including unrestricted shares and restricted shares.
An overdraft occurs when money is withdrawn or paid from a bank account, and the available balance in the account is insufficient to cover the transaction, resulting in a negative balance.
Overhead variance measures the difference between the overhead costs a business expected to incur and the overhead costs it actually incurred in production, helping managers control indirect expenses.
Overtime Pay — definition, examples, related terms, and FAQs.
Owner contribution is when a business owner personally invests money or assets into their business to help it grow, cover expenses, or provide initial capital, directly increasing the owner's equity in the business.
Owner Distribution — definition, examples, related terms, and FAQs.
Owners Draw — definition, examples, related terms, and FAQs.
Owners Equity represents the true ownership stake in a business, reflecting the initial investments made by owners plus accumulated profits, minus any owner withdrawals.
Paid Time Off — definition, examples, related terms, and FAQs.
Paid-in capital represents the total amount of money and other assets that stockholders have contributed directly to a company in exchange for ownership shares, rather than from retained earnings or borrowed funds.
Par value is a nominal assigned value to a share of stock during its initial issuance, typically set very low, and has little to no relation to the stock's market value.
Participation Rights — definition, examples, related terms, and FAQs.
Partners Capital — definition, examples, related terms, and FAQs.
Pass-Through Entity — definition, examples, related terms, and FAQs.
Passive Foreign Investment Company — definition, examples, related terms, and FAQs.
Passive income refers to specific types of earnings from businesses you do not materially participate in, or from rental property. It also includes earnings from limited partnerships or other activities where you aren't actively involved, and has special tax rules.
Patents are a form of intellectual property that grants an inventor exclusive rights to an invention for a set period, preventing others from making, using, or selling it. In accounting, they are recognized as intangible assets.
Payables Turnover measures how quickly a business pays its suppliers, reflecting the efficiency with which a company manages its short-term obligations and cash flow. A higher ratio often indicates better liquidity.
Payback Period — definition, examples, related terms, and FAQs.
The Payback Period on Customer Acquisition Cost (CAC) is a profitability metric that tells you how long it takes for a business to recoup the money invested to acquire a new customer, through the revenue generated by that customer.
Payment Processor — definition, examples, related terms, and FAQs.
Payroll expense represents the total cost a business incurs for compensating its employees, including wages, salaries, bonuses, and associated employer-paid payroll taxes and benefits.
Payroll Journal Entry — definition, examples, related terms, and FAQs.
A payroll register is a comprehensive record documenting all financial details for each employee's pay period, including gross wages, deductions, net pay, and cumulative totals.
Payroll Service Provider — definition, examples, related terms, and FAQs.
Payroll taxes are amounts an employer withholds from an employee's wages and taxes an employer pays based on employees' wages, used to fund Social Security, Medicare, and other programs.
The PCAOB, or Public Company Accounting Oversight Board, is a non-profit corporation established by Congress to oversee the audits of public companies to protect investors. It sets auditing standards, inspects audit firms, and enforces compliance.
Pension Liability — definition, examples, related terms, and FAQs.
Percentage of Completion Method — definition, examples, related terms, and FAQs.
A performance obligation is a promise in a contract with a customer to transfer a distinct good or service. It's a fundamental concept in how businesses recognize revenue according to generally accepted accounting principles.
The Periodic Inventory System is an inventory accounting method where inventory balances and cost of goods sold are updated only at specific intervals, typically at the end of an accounting period, rather than continuously after every sale or purchase.
Permanently Restricted Net Assets — definition, examples, related terms, and FAQs.
A Perpetual Inventory System continuously updates inventory records in real-time as items are bought, sold, or returned, providing an immediate snapshot of stock levels and costs.
Perpetuity Growth Rate — definition, examples, related terms, and FAQs.
Personal Income Tax is a government levy on an individual's earnings, including wages, salaries, business profits, interest, and dividends, used to fund public services.
Petty cash is a small, on-hand fund of cash used for minor, day-to-day business expenses that are impractical to pay by check or electronic transfer.
A Physical Inventory Count is the process of manually counting and documenting every inventory item a business owns, providing an accurate snapshot of actual stock levels and condition.
Piece-Rate Pay — definition, examples, related terms, and FAQs.
Piercing the Corporate Veil is a legal concept where courts disregard the limited liability protection of a corporation or LLC, holding owners personally responsible for the business's debts or liabilities.
Point of Sale System — definition, examples, related terms, and FAQs.
Pooling of Interests was an accounting method for business combinations where combining companies were treated as though they had always been one entity, blending their assets and liabilities at their historical book values.
Portfolio diversification is an investment strategy that mixes a variety of investments within a portfolio to minimize risk, aiming to protect against significant losses from the poor performance of any single asset.
Positive Pay — definition, examples, related terms, and FAQs.
Post-Closing Adjustment — definition, examples, related terms, and FAQs.
Practice Management Software is a specialized digital tool designed for Accounting & Tax Professionals to streamline administrative tasks, manage client relationships, track projects, and automate billing.
Precedent Transactions Analysis — definition, examples, related terms, and FAQs.
Preferred Return — definition, examples, related terms, and FAQs.
Preferred Stock — definition, examples, related terms, and FAQs.
A preferred stock dividend is a fixed payment made to preferred shareholders before common shareholders receive any dividends, offering a predictable income stream with priority rights.
Premium Bond — definition, examples, related terms, and FAQs.
The Premium Tax Credit (PTC) is a refundable tax credit that helps eligible individuals and families afford health insurance coverage purchased through a Health Insurance Marketplace, reducing monthly premium payments.
Prepaid expenses are payments made for goods or services that will be used in the future, recorded as an asset until they are consumed or expire.
Prepaid insurance is an asset representing coverage paid for in advance but not yet used, gradually expensed over the policy period as earned by the insurer.
Prepaid rent is an asset account representing rent paid in advance for a future period, before the business uses the rental space. It's an important concept for accurate financial reporting and cash flow management.
Prevailing Wage refers to the minimum hourly wage, including benefits, that contractors and subcontractors must pay workers on government-funded construction or service projects.
Preventive Controls are internal controls designed to stop errors, fraud, or unauthorized activities from happening in the first place, acting as proactive safeguards within a business's processes.
The Price-to-Earnings (P/E) Ratio is a metric that compares a company's current share price to its per-share earnings, indicating how much investors are willing to pay for each dollar of earnings.
Prime Cost — definition, examples, related terms, and FAQs.
Prior Period Adjustments are corrections of errors in financial statements that were prepared and issued in a prior accounting period. They impact the beginning balance of retained earnings and are reported net of tax.
Private equity refers to investment capital provided by firms or funds that directly invest in private companies or acquire public companies, taking them private, with the goal of increasing value and eventually selling for profit.
Private Foundation — definition, examples, related terms, and FAQs.
Pro Forma Financial Statements are forward-looking financial reports that project a company's future financial performance based on certain assumptions. They show what your business's financial picture might look like if specific events or plans happen.
Pro Rata Rights allow existing investors to participate in future funding rounds to maintain their percentage ownership in a company, preventing dilution of their stake.
Process costing is an accounting method used to determine the cost of each unit produced when identical, mass-produced items move through a series of continuous production steps or processes.
A Professional LLC (PLLC) is a limited liability company specifically designed for certain licensed professionals, offering personal liability protection similar to an LLC while adhering to professional regulatory standards.
Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence, essential for Accounting & Tax Professionals performing audit and assurance engagements.
A Profit and Loss Statement, also known as an Income Statement, is a financial report that summarizes a company's revenues, costs, and expenses over a specific period, showing its net profit or loss.
Profit Per Employee — definition, examples, related terms, and FAQs.
The Profitability Index (PI) is a capital budgeting tool that measures the present value of future cash flows relative to the initial investment, helping businesses evaluate the attractiveness of a project.
Program Services Expense — definition, examples, related terms, and FAQs.
A progressive tax is a tax system where individuals and businesses with higher incomes pay a larger percentage of their income in taxes, meaning the tax rate increases as the taxable amount increases.
Property Class Life refers to the specific number of years the IRS assigns to different types of business property for depreciation purposes, dictating how long you can deduct its cost.
Property Plant and Equipment (PPE) refers to a company's long-term tangible assets used for operations, such as land, buildings, machinery, and vehicles, not intended for sale.
Property tax is a locally assessed tax on real estate and sometimes personal property, calculated as a percentage of the property's assessed value, and used to fund local government services.
The Prudence Concept, also known as conservatism, requires Accounting & Tax Professionals to record revenues and profits only when they are certain, and to immediately recognize expenses and potential losses as soon as they are probable.
PTO accrual is the system by which employees earn paid time off (PTO) benefits, like sick days or vacation, over a period of time, rather than receiving a lump sum at the start of a year.
Public Support Test — definition, examples, related terms, and FAQs.
Purchase Accounting is a method used when one company buys another, recording the acquired assets and liabilities at their fair market values on the buyer's financial statements.
A Purchase Agreement is a critical legal document that formalizes the terms and conditions for the sale and purchase of a business, its assets, or shares, ensuring clarity and protection for both buyer and seller.
Purchase Price Allocation — definition, examples, related terms, and FAQs.
Push-Down Accounting is an accounting method where a subsidiary records the purchase price adjustments from its acquisition directly onto its own financial statements, reflecting its new fair value and the parent company's cost of acquisition.
QoE Report — definition, examples, related terms, and FAQs.
The Qualified Business Income (QBI) Deduction, also known as the Section 199A deduction, allows eligible self-employed individuals and small business owners to deduct up to 20% of their qualified business income from their federal taxable income.
A Qualified Opinion is an auditor's report indicating that a company's financial statements are generally presented fairly, except for a specific, identifiable departure from accounting principles or a scope limitation.
Qualifying Child — definition, examples, related terms, and FAQs.
Qualifying Relative — definition, examples, related terms, and FAQs.
Quality of Earnings — definition, examples, related terms, and FAQs.
Quarter-End Close — definition, examples, related terms, and FAQs.
Quasi-Endowment — definition, examples, related terms, and FAQs.
The Quick Ratio, also known as the Acid-Test Ratio, measures a company's ability to meet its short-term obligations using its most liquid assets, excluding inventory.
QuickBooks is a popular accounting software designed to help small and medium-sized businesses manage their financial records, including income, expenses, invoices, and payroll.
QuickBooks Online — definition, examples, related terms, and FAQs.
R&D Tax Credit — definition, examples, related terms, and FAQs.
Raw materials inventory includes the basic goods that a business purchases and stores for use in creating its finished products, representing a key asset on the balance sheet.
Real Options Analysis is a financial valuation method that helps businesses evaluate investment opportunities by considering the flexibility to make future decisions, much like purchasing an option in the financial markets, but applied to physical assets or projects.
The Realization Principle dictates that revenue should only be recorded in your books when it has been earned and there's a reasonable expectation of receiving the payment, regardless of when cash is actually exchanged.
A realized gain is the profit your business makes when you sell an asset for more than its original cost or adjusted basis, marking an actual increase in wealth.
A Realized Loss occurs when you sell an asset for less than its adjusted cost basis. This loss is recognized on your financial records and can impact your tax liability.
Receipt capture software is a digital tool that automatically extracts key information from physical or digital receipts, simplifying expense tracking and record-keeping for businesses.
Receivables Turnover — definition, examples, related terms, and FAQs.
Record Date — definition, examples, related terms, and FAQs.
Recurring Journal Entry — definition, examples, related terms, and FAQs.
Recurring Revenue — definition, examples, related terms, and FAQs.
Refund liability is an accounting term representing the money a business owes to customers who are expected to return goods or services and receive a reimbursement.
A Refundable Tax Credit is a type of tax credit that can reduce a taxpayer's tax liability below zero, potentially resulting in a refund even if no tax was originally owed.
A Registered Agent is an individual or entity designated to receive official legal and tax correspondence on behalf of your business, ensuring compliance with state regulations.
Regressive Tax — definition, examples, related terms, and FAQs.
Reimbursable Expenses — definition, examples, related terms, and FAQs.
Relevance in accounting means financial information can genuinely influence a user's decisions, helping them predict future outcomes or confirm past expectations.
Reliability in accounting means your financial information is trustworthy, free from big errors, and shows the true financial picture of your business. It allows you to make confident decisions based on solid, unbiased numbers.
Remote Deposit Capture (RDC) is a banking service that allows individuals and businesses to deposit checks into their accounts electronically without physically visiting a bank branch, using a scanner or a smartphone.
Rent Expense — definition, examples, related terms, and FAQs.
Reorder Point is the minimum inventory level that triggers an order to replenish stock, balancing the need to avoid stockouts with minimizing holding costs.
Representations and Warranties, often called 'Reps and Warranties,' are statements of fact made by one party to another in a business acquisition or merger agreement, which are legally binding and used to allocate risk.
Reps and Warranties Insurance protects buyers and sellers in mergers and acquisitions (M&A) from financial losses due to unknown breaches of contractual promises made during the deal.
A Repurchase Agreement (Repo) is a deal where a party sells securities to another with an agreement to buy them back later at a slightly higher price, effectively acting as a short-term, collateralized loan.
Research and Development Expense — definition, examples, related terms, and FAQs.
Restricted Cash — definition, examples, related terms, and FAQs.
A Restricted Fund represents financial resources received by a nonprofit organization with specific donor-imposed limitations on their use, ensuring the funds are spent for designated purposes only.
Restricted Stock Units (RSUs) are a form of equity compensation representing a promise from an employer to deliver shares of company stock to an employee at a future date upon satisfaction of certain vesting conditions.
Restructuring Charges — definition, examples, related terms, and FAQs.
Restructuring Liability — definition, examples, related terms, and FAQs.
Retained Earnings represents the accumulated profits a business keeps after paying out dividends to shareholders. It's the portion of net income reinvested back into the company rather than distributed.
Return on Assets (ROA) measures how efficiently a company uses its assets to generate profit, indicating management's effectiveness in turning investments into net income.
Return on Capital Employed — definition, examples, related terms, and FAQs.
Return on Equity — definition, examples, related terms, and FAQs.
Return on Invested Capital (ROIC) measures how effectively a company generates profits from the money invested by both its shareholders and debt holders.
Return on Investment (ROI) is a performance metric used to evaluate the efficiency of an investment or compare the efficiency of several different investments. It quantifies the benefit of an investment versus its cost.
Return on Sales (ROS) is a financial ratio that measures how much profit a company makes for every dollar of sales. It shows a business's operational efficiency by indicating what percentage of revenue is converted into net income.
Revenue is the total income generated by a business from its primary activities, such as selling goods or services, before deducting any expenses.
Revenue Per Employee is a financial metric that measures how much revenue a business generates for each employee, indicating operational efficiency and productivity.
The Revenue Recognition Principle is a fundamental accounting rule stating that businesses should record revenue when it is earned, not necessarily when cash is received.
Reverse Stock Split — definition, examples, related terms, and FAQs.
Reversing entries are optional bookkeeping adjustments made at the start of a new accounting period to cancel out certain adjusting entries from the previous period, simplifying the recording of future transactions.
Review Engagement — definition, examples, related terms, and FAQs.
A Right of First Refusal (ROFR) is a contractual agreement giving a specific party the option to enter into a transaction and buy an asset under certain conditions, before it's offered to others.
Right of Return — definition, examples, related terms, and FAQs.
Right-of-Use Asset — definition, examples, related terms, and FAQs.
Rights Offering — definition, examples, related terms, and FAQs.
Risk-Free Rate — definition, examples, related terms, and FAQs.
A Rolling Budget is a financial plan that is continuously updated by adding a new budget period (e.g., month, quarter) as the current one concludes, maintaining a constant planning horizon.
A Rolling Forecast is a continuous financial projection that regularly updates future periods as current periods pass, typically maintaining a consistent forecast horizon (e.g., 12 months) by adding a new period as the oldest one expires.
Roth 401(k) — definition, examples, related terms, and FAQs.
Rule-Based Categorization — definition, examples, related terms, and FAQs.
Runway — definition, examples, related terms, and FAQs.
S Corporation — definition, examples, related terms, and FAQs.
SaaS Accounting — definition, examples, related terms, and FAQs.
SAFE Note — definition, examples, related terms, and FAQs.
Safety Stock — definition, examples, related terms, and FAQs.
Sage Intacct — definition, examples, related terms, and FAQs.
Salaries Payable — definition, examples, related terms, and FAQs.
Sale-Leaseback — definition, examples, related terms, and FAQs.
Sales and Use Tax Compliance involves correctly calculating, collecting, reporting, and remitting sales taxes on goods and services sold by businesses, and paying use taxes on purchases where sales tax wasn't collected.
Sales Discounts — definition, examples, related terms, and FAQs.
Sales Price Variance — definition, examples, related terms, and FAQs.
Sales Returns and Allowances — definition, examples, related terms, and FAQs.
Sales Revenue — definition, examples, related terms, and FAQs.
Sales tax is a consumption tax charged by state and local governments on the sale of goods and sometimes services, collected by the seller from the buyer and then remitted to tax authorities.
Sales Tax Payable is a current liability account on a business's balance sheet representing the sales tax collected from customers but not yet remitted to the taxing authorities.
Sales Volume Variance measures the impact of selling more or fewer units than planned on a business's revenue or profit, assuming all other factors remain constant.
Salvage value is the estimated resale value of an asset at the end of its useful life, less any disposal costs. It's crucial for calculating depreciation.
Same-store sales, also known as comparable store sales, measures the revenue generated by a business's established locations over a specific period, excluding sales from newly opened or recently closed stores.
Sarbanes-Oxley Act — definition, examples, related terms, and FAQs.
The Saver's Credit, officially called the Retirement Savings Contributions Credit, rewards eligible low- and moderate-income taxpayers for saving for retirement, reducing their tax liability dollar-for-dollar.
Scenario Planning — definition, examples, related terms, and FAQs.
Schedule C — definition, examples, related terms, and FAQs.
Schedule E — definition, examples, related terms, and FAQs.
Schedule K-1 is an IRS form used to report a taxpayer's share of income, losses, deductions, and credits from pass-through entities like partnerships, S corporations, and certain trusts or estates.
The SEC, or U.S. Securities and Exchange Commission, is a federal government agency responsible for protecting investors, maintaining fair and orderly securities markets, and facilitating capital formation in the United States.
Secondary Offering — definition, examples, related terms, and FAQs.
Section 1231 Property — definition, examples, related terms, and FAQs.
Section 1245 Property — definition, examples, related terms, and FAQs.
Section 1245 Recapture — definition, examples, related terms, and FAQs.
A Section 125 Cafeteria Plan allows employees to pay for certain health and welfare benefits with pre-tax dollars, reducing their taxable income and saving employers money on payroll taxes.
Section 1250 Property — definition, examples, related terms, and FAQs.
Section 1250 Recapture is an IRS rule that treats a portion of the gain from selling depreciated real property as ordinary income, specifically targeting the extra depreciation taken beyond straight-line methods.
Section 179 Deduction — definition, examples, related terms, and FAQs.
Secured debt is a loan backed by specific assets, called collateral, that a borrower pledges to a lender. If the borrower can't repay the loan, the lender can take possession of these assets.
Segment Reporting breaks down an organization's financial results into distinct business components or geographical regions, offering a clearer picture of how each part performs individually.
Segregation of Duties — definition, examples, related terms, and FAQs.
Self-Employment Tax — definition, examples, related terms, and FAQs.
Seller Discretionary Earnings (SDE) represents a business's total financial benefit to a single owner-operator before certain discretionary expenses, often used to value small businesses.
Selling Expenses — definition, examples, related terms, and FAQs.
Semi-Variable Costs — definition, examples, related terms, and FAQs.
Sensitivity Analysis — definition, examples, related terms, and FAQs.
SEP IRA — definition, examples, related terms, and FAQs.
Series LLC — definition, examples, related terms, and FAQs.
Service Revenue is the income a business earns from providing services, not from selling physical products. It's a key part of your business's overall income statement, reflecting the value you deliver to clients.
A Shareholder Agreement is a legally binding contract among the owners (shareholders) of a corporation, outlining their rights, responsibilities, and how the company will be managed.
Shareholders Equity — definition, examples, related terms, and FAQs.
Shift Differential — definition, examples, related terms, and FAQs.
Short-term capital gains are profits from selling a capital asset (like stocks or real estate) held for one year or less. These gains are typically taxed at ordinary income tax rates, which are often higher than long-term rates.
Short-Term Investments are liquid assets a business expects to convert into cash within one year, often held for temporary cash surpluses or strategic financial management.
Short-Term Lease Exemption — definition, examples, related terms, and FAQs.
Sight Draft — definition, examples, related terms, and FAQs.
SIMPLE IRA — definition, examples, related terms, and FAQs.
Single Filing Status — definition, examples, related terms, and FAQs.
Single-entry bookkeeping is a basic accounting method where each financial transaction records a single entry, much like a checkbook register, to track income and expenses.
A Single-Step Income Statement is a basic financial report that summarizes a company's revenues and expenses to calculate net income, presenting all revenues together and all expenses together in a single category.
Skimming fraud is a type of theft where cash is taken from an organization before it is officially recorded in the accounting system, making the stolen funds appear as though they were never received. It is one of the most difficult types of fraud to detect.
Small Cap Stock — definition, examples, related terms, and FAQs.
Social Security Tax is a mandatory payroll tax funding Social Security benefits, shared between employers and employees. It is levied on earnings up to an annual limit.
Software assets are non-physical company resources that provide future economic benefit, used for more than one year, such as purchased accounting software, customer relationship management (CRM) systems, or internally developed applications.
Solar Tax Credit — definition, examples, related terms, and FAQs.
A sole proprietorship is an unincorporated business owned and run by one individual, with no legal distinction between the owner and the business, making it the simplest business structure to form.
The Solvency Ratio is a financial metric that measures a company's ability to meet its long-term financial obligations. It indicates whether a business has enough assets, especially equity, to cover its debts over an extended period.
Specific Identification — definition, examples, related terms, and FAQs.
A Split-Interest Agreement is an arrangement, used primarily by nonprofits, where assets are managed by a trustee, with benefits split between the nonprofit and another beneficiary over time.
An SSN, or Social Security Number, is a unique nine-digit identification number assigned by the U.S. Social Security Administration, primarily used for tracking an individual's earnings and benefits, but also critical for tax purposes and financial transactions.
Stand-Alone Selling Price — definition, examples, related terms, and FAQs.
Standard costing is an accounting method that estimates the expected costs of producing goods or services, then compares these 'standard' costs to the actual costs incurred to identify differences and improve efficiency.
The Standard Deduction is a fixed dollar amount that taxpayers can subtract from their adjusted gross income (AGI) to reduce their taxable income, instead of listing out individual deductions (itemizing). It simplifies tax filing for many individuals.
State Business Registration is the legal process of formally recording a business with the appropriate state agencies, giving it legal standing to operate within that state.
A State Department of Revenue is the principal government agency responsible for administering and collecting state taxes, including income, sales, and excise taxes, within a specific U.S. state.
A State Tax ID, also known as a state identification number, is a unique number issued by individual states to businesses for tracking and reporting various state-level taxes, such as sales tax, unemployment insurance tax, and state income tax.
State Tax Nexus — definition, examples, related terms, and FAQs.
State Unemployment Tax (SUTA) is a payroll tax employers pay to their state government, which funds unemployment benefits for eligible workers who have lost their jobs through no fault of their own.
Statement of Activities — definition, examples, related terms, and FAQs.
The Statement of Comprehensive Income shows all changes in a company's equity from non-owner sources during a specific period, including both net income and other comprehensive income items not found on a standard income statement.
A Statement of Financial Accounting Standards (SFAS) was a pronouncement issued by the Financial Accounting Standards Board (FASB) that set authoritative Generally Accepted Accounting Principles (GAAP) in the United States.
Statement of Financial Position — definition, examples, related terms, and FAQs.
Statement of Functional Expenses — definition, examples, related terms, and FAQs.
The Statement of Owners Equity shows how the ownership stake in your business changed over a specific period, detailing contributions, profits, withdrawals, and other adjustments.
The Statement of Retained Earnings shows how a business's accumulated profits (or losses) change over a specific period, reflecting what's kept in the business versus paid out to owners.
The Statement of Stockholders Equity is a financial report showing changes in the ownership stake (equity) of a business over a specific period, detailing contributions, earnings, and distributions.
A static budget is a financial plan prepared for a single, pre-determined level of activity and production, meaning it does not adjust for changes in actual sales volume or cost drivers.
A statutory employee is a worker who, despite meeting certain criteria typically associated with independent contractors, is treated as an employee for Social Security and Medicare tax purposes, but not for federal income tax withholding.
Step costs are expenses that remain fixed over a certain range of activity but jump to a new, higher level once that activity threshold is crossed, then remain fixed again for a new range.
Stock Dividend — definition, examples, related terms, and FAQs.
Stock options grant an employee the right, but not the obligation, to purchase shares of company stock at a pre-determined price (strike price) within a specified timeframe, often used as advanced compensation.
A stock sale is a business acquisition where ownership of a company transfers by selling its outstanding shares to a buyer. The company itself continues to exist under new ownership, while the seller typically realizes capital gains.
A stock split occurs when a company increases the number of its outstanding shares by dividing existing shares, without changing the total market value of the company or the proportional ownership of shareholders.
Stockholders Equity — definition, examples, related terms, and FAQs.
Straight-line amortization is an accounting method used to spread the cost of an intangible asset evenly over its useful life, rather than expensing the entire cost in the year it was acquired.
Straight-Line Depreciation — definition, examples, related terms, and FAQs.
Sublease — definition, examples, related terms, and FAQs.
Subordinated Debt — definition, examples, related terms, and FAQs.
Subpart F Income is a category of passive or easily movable income earned by controlled foreign corporations (CFCs) that is taxable to the U.S. shareholders immediately, even if it's not distributed.
Subscription revenue recognition is the accounting process of spreading out the income earned from subscription sales over the period those services or products are actually provided, rather than recording it all upfront.
Substance Over Form is an accounting principle stating that the economic reality of a transaction or event should always take precedence over its legal form in financial reporting and tax.
Substantive testing involves detailed procedures performed by Accounting & Tax Professionals to detect material misstatements in a company's financial statements, focusing on the actual numbers and disclosures.
Sum of Years Digits — definition, examples, related terms, and FAQs.
Supporting Services Expense — definition, examples, related terms, and FAQs.
Suspense Account — definition, examples, related terms, and FAQs.
A sweep account automatically transfers surplus cash from a business's checking account into an interest-bearing investment account, or vice versa, to optimize earnings or cover shortfalls.
Synergy — definition, examples, related terms, and FAQs.
Systematic risk, also known as market risk, is the unavoidable risk inherent in the entire market or a market segment; it cannot be eliminated through diversification.
A T-account is a visual tool used in accounting to represent individual ledger accounts, showing increases and decreases with debits on the left side and credits on the right, much like a capital letter 'T'.
Tag-Along Rights — definition, examples, related terms, and FAQs.
Tangible assets are physical items owned by your business that have a measurable monetary value and are used to help generate income, such as buildings, machinery, vehicles, and equipment.
Target costing is a management technique used to determine the maximum allowable cost for a new product, based on its market price and desired profit margin. It flips traditional costing by starting with the customer's desired price.
A tax bracket is a range of income taxed at a specific rate by the government. The U.S. uses a progressive tax system, meaning higher income levels are taxed at higher marginal rates.
A tax credit directly reduces the amount of tax you owe, dollar for dollar, making it more powerful than a deduction which only reduces your taxable income.
Tax Deferral — definition, examples, related terms, and FAQs.
Tax Loss Harvesting is selling investments at a loss to offset capital gains and potentially reduce ordinary income, lowering your overall tax liability for the year.
A tax shelter is a legal method or investment designed to reduce or defer an individual's or business's taxable income, often by taking advantage of specific tax laws and regulations, but it must have economic substance beyond just tax savings.
Tax Withholding — definition, examples, related terms, and FAQs.
Taxable income is the portion of your gross income that is subject to taxation by the government, calculated after subtracting allowable deductions and exemptions from your total income.
Taxes Payable — definition, examples, related terms, and FAQs.
Temporarily Restricted Net Assets are funds a nonprofit organization has received with donor-imposed stipulations on their use, which will eventually expire either by the passage of time or by the organization meeting specific conditions.
Terminal Value is the estimated value of a business beyond a specified forecast period, often representing the majority of a company's total estimated worth.
Test of Controls is an audit procedure where Accounting & Tax Professionals evaluate the effectiveness of a business's internal controls in preventing or detecting material misstatements in financial records.
Throughput Accounting — definition, examples, related terms, and FAQs.
Time Draft — definition, examples, related terms, and FAQs.
The Time Period Assumption states that a business's economic life can be divided into artificial, but equal, time intervals, like months, quarters, or years, for financial reporting.
Times Interest Earned (TIE) is a solvency ratio that indicates a company's ability to meet its interest payment obligations using its operating income.
Top-Down Budgeting — definition, examples, related terms, and FAQs.
Total Asset Turnover measures how efficiently a business uses its assets to generate sales, indicating how many dollars in sales are produced for each dollar of asset investment.
Total Assets represent the sum of everything a business owns that has economic value, including cash, inventory, property, and equipment, providing a snapshot of its financial resources.
Total Equity — definition, examples, related terms, and FAQs.
Total Liabilities represent the complete sum of all obligations a business owes to outside parties, both short-term and long-term, reported on the balance sheet.
A trade discount is a reduction in the list price of goods or services offered by suppliers to businesses that purchase in bulk or offer specific sales channels, not impacting the recorded revenue.
Trade Payables — definition, examples, related terms, and FAQs.
Trade Receivables — definition, examples, related terms, and FAQs.
Trademarks are distinctive signs, designs, or expressions that identify products or services of a particular source from those of others, recognized as valuable intangible assets for businesses.
Trading Securities are investments in debt or equity instruments bought and held primarily for the purpose of selling them in the near term to profit from short-term price movements. They are recorded on a company's balance sheet at fair value.
Transaction Categorization is the process of assigning every financial transaction a specific category, like 'Office Supplies' or 'Utilities,' to organize financial data for reporting, analysis, and tax purposes.
Transaction Price — definition, examples, related terms, and FAQs.
Transfer Pricing — definition, examples, related terms, and FAQs.
A Treasury Bill (T-bill) is a short-term debt security issued by the U.S. government, sold at a discount from its face value, and maturing in one year or less.
Treasury Bond — definition, examples, related terms, and FAQs.
Treasury Stock — definition, examples, related terms, and FAQs.
A Trial Balance is an internal accounting report listing all the general ledger accounts with their debit or credit balances, ensuring that total debits equal total credits. It’s a vital step before creating main financial statements.
Two-Way Sync is a software feature that automatically updates data in two different systems whenever a change is made in either system, ensuring both always reflect the latest information.
Undeposited Funds is a temporary holding account in accounting systems for payments received from customers that haven't yet been deposited into the business's bank account.
Understandability in accounting means that financial information is presented clearly and concisely, making it easy for users with a reasonable knowledge of business and accounting to comprehend its meaning.
Unearned revenue is money a business receives for goods or services it has not yet delivered, representing an obligation to the customer. It's recorded as a liability on the balance sheet until the service or product is provided.
An unfavorable variance occurs when actual costs are higher than planned, or actual revenues are lower than planned, indicating a negative deviation from budget or standard.
Units of Production Depreciation is an accounting method that depreciates an asset based on its actual usage or output, rather than solely on the passage of time. This approach matches depreciation expense more closely with the asset's economic consumption.
Unlevered Free Cash Flow (UFCF) is the cash a business generates from its operations after accounting for capital expenditures, before any debt payments or interest expenses are considered.
Unqualified Opinion — definition, examples, related terms, and FAQs.
An unrealized gain is an increase in the value of an asset that an individual or company owns but has not yet sold, meaning the gain exists only on paper and hasn't become cash.
An unrealized loss occurs when an asset you own decreases in value but you haven't sold it yet, meaning the loss isn't officially locked in.
Unrestricted Fund — definition, examples, related terms, and FAQs.
Unsecured debt is a loan or financial obligation not backed by collateral, meaning a lender cannot seize specific assets if you fail to repay.
Unsystematic risk is the risk specific to a company or industry that can be reduced through diversification, unlike market-wide risks. It's often called 'specific risk' or 'diversifiable risk'.
Usage-Based Revenue is income a business earns based on how much a customer uses a product or service, rather than a fixed fee or subscription.
Use Tax — definition, examples, related terms, and FAQs.
Useful life is the estimated period a business asset is expected to be economically productive and provide benefits to the business, rather than its physical lifespan, impacting how its cost is expensed over time through depreciation.
Utilities Expense refers to the costs a business incurs for essential services such as electricity, water, gas, and communication (internet, phone) that are necessary for its day-to-day operations and premises.
Value Added Tax (VAT) is a consumption tax charged on goods and services, collected at each stage of a supply chain where value is added, ultimately borne by the end consumer.
Value Stock — definition, examples, related terms, and FAQs.
Variable consideration is a portion of the payment a business expects to receive for goods or services, but its exact amount depends on future events such as discounts, refunds, incentives, penalties, or performance bonuses.
Variable costing is an accounting method that treats all fixed production costs as period costs, meaning they are expensed in the period incurred, rather than tied to inventory.
Variable costs are expenses that change in direct proportion to the amount of goods or services your business produces. As production goes up, so do these costs; as production goes down, they decrease.
Variable Lease Payments — definition, examples, related terms, and FAQs.
Variance Analysis is a managerial accounting technique that compares actual financial results to budgeted or standard amounts, identifying and explaining the differences to help businesses control costs and improve performance.
Vehicles — definition, examples, related terms, and FAQs.
Venture Capital refers to funding provided to small, early-stage, and emerging firms that have been deemed to have high growth potential or which have demonstrated high growth.
Verifiability in accounting means that different knowledgeable and independent Accounting & Tax Professionals would agree that a specific financial report represents information faithfully, using the same methods, or confirming that particular methods were applied without material error or bias.
Vesting Schedule — definition, examples, related terms, and FAQs.
A volume discount is a price reduction offered by a seller to a buyer for purchasing a large quantity of goods or services, rewarding bulk purchases with lower per-unit costs.
The W-2 Form, Wage and Tax Statement, is an annual document employers issue to employees and the IRS, detailing wages earned and taxes withheld for the calendar year. It's crucial for filing individual income tax returns.
W-4 Form — definition, examples, related terms, and FAQs.
A W-9 Form, formally an IRS Form W-9, Request for Taxpayer Identification Number and Certification, is a document used by a business or person to request a payee's correct taxpayer identification number (TIN) and to certify that the TIN is correct.
Wage Garnishment — definition, examples, related terms, and FAQs.
Wages Payable — definition, examples, related terms, and FAQs.
Walkthrough Testing — definition, examples, related terms, and FAQs.
Warrant — definition, examples, related terms, and FAQs.
Warranty Liability is a company's estimated future cost to repair or replace products under warranty, recorded as a current or long-term liability on the balance sheet.
Waterfall Distribution — definition, examples, related terms, and FAQs.
Wave Accounting — definition, examples, related terms, and FAQs.
Wayfair Decision — definition, examples, related terms, and FAQs.
Weighted Average Cost is an inventory valuation method that averages the cost of all items in stock to determine the cost of goods sold and remaining inventory. It smooths out price fluctuations, making financial reporting more consistent.
Weighted Average Cost of Capital (WACC) is the average rate your business expects to pay to finance its assets, considering the proportion of debt and equity used.
Whistleblower — definition, examples, related terms, and FAQs.
A wire transfer is an electronic funds transfer service that allows individuals and businesses to send money quickly and securely between banks, often across national borders, using a network like SWIFT or Fedwire.
Withholding tax is the amount of an employee's income that an employer deducts and pays directly to the government on the employee's behalf, covering income tax, Social Security, and Medicare.
Work in Process Inventory (WIP) represents the value of goods that have begun the manufacturing process but are not yet completed. It includes raw materials, direct labor, and manufacturing overhead costs incurred up to a specific point.
Workflow automation uses technology to handle repetitive tasks in a business process automatically, reducing manual effort and improving efficiency.
Working capital is the difference between your business's current assets and current liabilities, indicating short-term liquidity and operational efficiency.
Working Capital Adjustment — definition, examples, related terms, and FAQs.
The Working Capital Cycle measures the time it takes for a business to convert its net working capital into cash, starting from the purchase of inventory to the collection of cash from sales.
Working Capital Loan — definition, examples, related terms, and FAQs.
The Working Capital Ratio measures a company's ability to cover its short-term obligations with its short-term assets, indicating its immediate financial health.
Xero — definition, examples, related terms, and FAQs.
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