A method of depreciation that allows for greater depreciation expense in the early years of an asset's life and less in the later years, compared to straight-line depreciation.

The total depreciation recorded for an asset or group of assets from the time they were placed in service until the date of the financial statement or tax return. This amount is recorded as a contra account to the related asset account, reducing the asset's book value on the balance sheet.

A federal tax designed to ensure that individuals, estates, trusts, and corporations with significant economic income pay a minimum level of income tax, regardless of deductions, exemptions, or other tax breaks they may otherwise be able to claim.

An increase in the value of an asset, such as a stock, bond, commodity, or real estate, over a period of time.

A legal process governed by federal statute in which an insolvent debtor's assets are liquidated and managed by a court-appointed trustee to satisfy debts to the greatest extent possible.

A bond is a type of long-term promissory note, issued as a security under federal or state laws, where the issuer borrows funds from the bondholder and agrees to pay back the principal amount at a specified maturity date, along with periodic interest payments.

The net amount that an asset or liability is recorded on the balance sheet, also known as the carrying value. It is calculated by deducting accumulated depreciation, amortization, or impairments from the original cost of the asset.

In financial and tax contexts, 'boot' refers to any additional cash or property added to a transaction to balance the value of exchanged properties, typically in transactions that are otherwise nontaxable.

An outlay of money to acquire or improve long-term assets such as buildings, machinery, or equipment, which are intended to be used in the operations of a business and are not intended for resale.

A capital gain is the profit realized from the sale or exchange of a noninventory asset, such as stocks, real estate, or other investments, where the sale price exceeds the asset's original purchase price. These gains are usually treated favorably under tax laws, often at a lower rate than ordinary income.

The net amount at which an asset or liability is valued on a company's balance sheet, after accounting for depreciation, amortization, and impairment costs, as well as accumulated liabilities. Also known as book value.

An entity or individual that buys and sells securities for its own account, acting as a principal in the transaction. Dealers set bid prices for buying securities and ask prices for selling, thus making markets and taking on the associated risks.

A financial document representing a loan made by an investor to a borrower, which includes the terms of repayment and, typically, interest payments.

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. It is calculated by dividing total liabilities by shareholders' equity.

A trust that holds a real property, allowing it to qualify for a 1031 exchange and provide an opportunity for the investor to relinquished management responsibilities.

A non-cash accounting expense that allocates the cost of acquiring long-term assets over their useful life, representing the asset's wear and tear, obsolescence, or other declines in value over time.

The act of transferring money, property, or services in return for a combination of these items.

An accounting method of valuing inventory under which the costs of the first goods acquired are the first costs charged to expense, commonly known as First In, First Out.

The nominal value of a security or financial instrument as stated by the issuer, which is the amount due to be paid at maturity. It does not fluctuate with market value.

The price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts.

A fiduciary is a person or entity who holds a legal or ethical relationship of trust with one or more other parties, typically taking care of money or assets for another person. A fiduciary must act in the best interest of the party whose assets they are managing.

A financial gain is the profit realized when the revenue received from a transaction exceeds the costs or when a security is sold for more than its purchase cost. The gain represents the difference between the sale price and the original cost.

A business arrangement where two or more individuals, known as general partners, manage the business and are equally liable for its debts and obligations. There are no limited partners in a general partnership.

Goodwill is an intangible asset that represents the premium paid over the fair value of the net identifiable assets (tangible and intangible) and liabilities of an entity during its acquisition.

A transaction or series of transactions undertaken to reduce the risk of an investment, often by taking an offsetting position in a related security.

A debt security that a company has the intent and ability to hold until its maturity date, at which point it is expected to be paid in full.

The duration between the acquisition and the sale or disposition of an asset by a taxpayer.

An asset that lacks physical substance and is identifiable as a non-monetary asset without physical substance. This includes assets such as patents, trademarks, copyrights, goodwill, and brand recognition.

The price paid for borrowing money, typically expressed as a percentage rate over a period of time, which compensates the lender for the use of their money and reflects the rate of exchange of present consumption for future consumption.

The discount rate at which the present value of future cash flows equals the initial investment outlay, used to evaluate the profitability of potential investments.

Intrinsic value refers to the inherent, true value of an asset, determined by fundamental analysis without reference to its market value. It is often calculated using data inputs in a valuation model.

A business arrangement where two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. Each of the participants is responsible for profits, losses, and costs associated with the venture.

Debt securities issued by companies with higher than normal credit risk, classified as 'non-investment grade' bonds. These securities typically offer a higher rate of interest to compensate for the increased risk.

In the context of top heavy plans, a key employee is defined as 1) an officer of the employer earning more than $130,000; 2) an individual who owns more than 5 percent of the employer; or 3) an individual who owns more than 1 percent of the employer and has compensation greater than $150,000.

Physical or mental effort exerted during work or tasks.

A business structure where one or more general partners manage the business and are personally liable for partnership debts, while one or more limited partners contribute capital and share profits but their liability is limited to the extent of their investment.

A financial arrangement in which a lender provides a sum of money to a borrower with the expectation that the borrower will return the amount over a specified period, often with interest.

A profit realized from the sale or exchange of a capital asset held for more than one year, subject to long-term capital gains tax, which is typically lower than the tax on short-term gains.

A debt that falls due more than one year in the future, or beyond the normal operating cycle, and is typically to be paid out of noncurrent assets.

The percentage of tax applied to an individual's or entity's income for each additional dollar of income.

The price at which an asset would trade in a competitive auction setting, often used to refer to the current price of a stock or bond on the open market.

The significance of an omission or misstatement of accounting information that, in the context of surrounding circumstances, could influence the judgment of a reasonable person relying on the information.

Net Asset Value (NAV) is the market value per share of a mutual fund or an exchange-traded fund (ETF). It is calculated by dividing the total value of all the assets in the portfolio, minus any liabilities, by the number of shares outstanding.

Notes receivable are written promissory notes that represent money owed to an entity, typically due within one year, and are recognized as assets on the balance sheet.

A value assigned to assets or liabilities that is not based on cost or market value, often used in financial contracts to specify the quantities upon which payments are based.

A written document that outlines the governance and operational guidelines of a Limited Liability Company (LLC), serving a similar purpose to corporate bylaws or a partnership agreement.

Operating profit or loss is the difference between a company's revenues and its related costs and expenses, derived exclusively from its regular business activities, before deductions for interest and taxes.

An option is a financial derivative that gives the buyer the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a specified price (strike price) within a specified time period.

The portion of stockholders' equity that comes from the capital contributed by investors through the purchase of stock at issuance, excluding any capital generated from earnings or donations.

The original sum of money borrowed in a loan, or the amount of the investment, exclusive of any interest or dividends. It also refers to the party whose interests are represented by an agent in a principal-agent relationship.

A Qualified Intermediary refers to a person that acts as an intermediary qualified under certain sections of the U.S. Internal Revenue Code to undertake specified activities.

An audit opinion that states the financial statements are fairly presented in accordance with Generally Accepted Accounting Principles (GAAP), except for the effect of a matter to which a qualification relates, often due to a scope limitation or inability to obtain sufficient appropriate audit evidence.

A liquidity metric that measures a company's ability to cover its current liabilities with its most liquid assets, without relying on the sale of inventory.

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

A financial metric that measures the profitability of a company relative to its total assets, calculated by dividing net income by average total assets. This ratio indicates how efficiently a company is using its assets to generate earnings.

A financial ratio that measures the profitability of a company in relation to the shareholders' equity, calculated by dividing net income by average shareholders' equity.

A provision in statutes and regulations that offers protection from adverse legal action or penalties if specific conditions are met, particularly when a legal requirement is ambiguous or carries a risk of unintended violation.

A financial arrangement in which a property owner sells an asset, typically real estate, to a buyer and then leases it back from the buyer. This enables the seller to continue using the asset while converting it into capital.

A principle in accounting where a business is considered distinct and separate from its owners, creditors, and other businesses, allowing for independent financial and legal transactions.

A financial transaction where an investor sells an asset they do not currently own, typically securities, with the intention of repurchasing them later at a lower price. The investor borrows the asset to make the sale and later buys it back to return it to the lender.

An encumbrance placed on property as security for unpaid taxes, giving the taxing authority a legal claim against the property until the debt is paid.

A tax shelter is a legal arrangement where certain investments or financial decisions are made to reduce, defer, or eliminate tax liabilities.

A tax imposed by the government on the transfer of ownership of property, including gifts and estates, as transactions occur.

Interest that has been collected on a loan by a financial institution but cannot yet be recognized as earnings because the principal of the loan has not been outstanding for a sufficient period.

A legal obligation where all business owners are personally responsible for all debts of the business, without any limit on the amount for which they are liable.

Total costs that change in direct proportion to changes in productive output or any other measure of volume.

A loan whose interest rate changes over its life in relation to the level of an index, allowing for fluctuating payments.

A security issued by a corporation that gives the holder the right to purchase a specific amount of stock at a specified price within a certain time frame. Warrants are similar to call options but are issued directly by the company and have longer durations.

An inventory costing method used under the periodic inventory system that calculates the cost of ending inventory and the cost of goods sold based on the weighted average cost of all items available for sale during the period.

The income return on an investment, such as dividends or interest, expressed as a percentage of the investment's cost or current market value.

A graph that illustrates the relationship between interest rates and the maturities of debt securities of the same credit quality, showing how these rates vary with different maturity dates.

A bond on which the holder receives only one payment at maturity, which includes both the principal and the interest accrued from issuance to maturity.

The process of identifying and reclassifying personal property assets that are grouped with real property assets for depreciation purposes. This process allows the personal property assets to be depreciated over a shorter recovery period than the real property assets.

The rate of return that a business must earn on its investment projects to maintain its market value and attract funds. It represents the opportunity cost of making a specific investment, instead of investing the same funds in an alternative venture with equivalent risk.

Cost of Goods Sold (COGS) represents the direct costs associated with the production of goods sold by a company. This includes the cost of the raw materials and labor used in the production of these goods.

The interest rate on a debt security that the issuer promises to pay to the holder until maturity, expressed as an annual percentage of the face value.

A bond that is typically not registered with the issuing corporation and carries detachable coupons. These coupons state the amount of interest due and the payment date, which the holder must present to receive interest payments.

A tax-exempt trust exclusively established for the purpose of paying the qualified education expenses of the designated beneficiary, which can include higher education costs as well as elementary and secondary education expenses.

In double-entry bookkeeping, a credit is an entry on the right side of an account ledger that represents the increase in a liability, revenue, or equity account, or the decrease in an asset or expense account.

A legally binding contract in which one party provides funds or resources to another with the agreement that the receiver will repay the amount on a future date, potentially with additional interest or fees.

A balance remaining after accounting entries that represents a liability or income to the entity, often indicating the amount that the entity owes to others or has in surplus.

A party that loans money or other assets to another party, typically expecting repayment with terms agreed upon by both parties.

An asset that is expected to be converted into cash, sold, or consumed in operations within one operating cycle or within a year if more than one cycle is completed annually.

An obligation whose liquidation is expected to require the use of existing resources classified as current assets, or the creation of other current liabilities, typically due within one year.

A financial metric used to evaluate a company's ability to pay off its short-term liabilities with its short-term assets. The current ratio is calculated by dividing the company's current assets by its current liabilities.

The present worth of an asset, calculated either based on its current market price compared to its historical cost, or by discounting the future revenue stream of the asset using compound interest principles.

The annual interest received from a bond expressed as a percentage of its current market price.

A method of accelerated depreciation approved by the Internal Revenue Service (IRS), allowing for twice the rate of annual depreciation compared to the straight-line depreciation method.

The last day on which auditors perform their fieldwork and finalize their evaluation of the company's financial statements, including the review of significant events that occur after the financial statement date.

An entity or individual that buys and sells securities for its own account, acting as a principal in the transaction. Dealers set bid prices for buying securities and ask prices for selling, thus making markets and taking on the associated risks.

A payment made under a life insurance contract, paid by reason of the death of the insured, which may include accelerated death benefits paid under certain conditions while the insured is still alive.

A type of debt instrument that is not secured by physical assets or collateral but is backed only by the general creditworthiness and reputation of the issuer.

A type of stock issued under a contract that provides for fixed payments at scheduled intervals, similar to preferred stock, but classified as equity rather than debt in the event of liquidation.

In double-entry bookkeeping, a debit is an entry on the left side of an account ledger, indicating an increase in assets or expenses, or a decrease in liabilities or revenue.

A balance remaining in an account after one or a series of bookkeeping entries, representing an asset or an expense of the entity.

Debt refers to money, notes, bonds, goods, or services owed by one party to another, typically as a result of borrowing funds or acquiring assets.

A financial document representing a loan made by an investor to a borrower, which includes the terms of repayment and, typically, interest payments.

The process of repaying debt, either through periodic payments or a lump sum, effectively extinguishing the financial obligation.

A financial instrument representing a loan made by an investor to a borrower, typically in the form of bonds, notes, or bills; it is a formal document that evidences the obligation of the borrower to repay the principal along with interest.

A fund specifically allocated for the accumulation of resources to pay principal and interest on long-term debt. The funds are used to ensure timely debt repayment.

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. It is calculated by dividing total liabilities by shareholders' equity.

A party, individual, or entity that owes money or other assets to another party, known as a creditor.

An individual who has died.

In corporate finance, to declare refers to the act by a company's board of directors to authorize the payment of a dividend on a specified date.

An accelerated depreciation method that applies a constant depreciation rate, which is a multiple of the straight-line rate, to the declining book value (carrying value) of a tangible long-lived asset each period.

The act of misusing or embezzling funds, typically involving the misappropriation of financial assets by a person entrusted with their care.

The failure to fulfill a financial obligation, such as the timely payment of interest or principal on a debt, or to comply with other terms specified in a contract or agreement.

The setting aside by a borrower of cash or bonds sufficient to service the borrower's debt, leading to the removal of both the debt and the offsetting assets from the balance sheet. Defeasance can also refer to the annulment of a contract or deed, often through a specific clause that allows for such annulment.

The postponement of the recognition of an expense or revenue in the ledger, where the expense has been paid or incurred, or the revenue has been received, but is recorded in a subsequent accounting period.

A deferred charge is an expense incurred that is accounted for as an asset on a balance sheet until it can be amortized over time, as it provides future economic benefits.

Assets or liabilities that arise from differences in timing or measurement between tax and accounting principles, affecting when taxes are recognized in financial statements.

A bond that does not pay interest until a specified future date or until maturity, instead accumulating interest that is paid together with the principal at a later date.

An annuity contract that stipulates that payments to the annuitant will commence after a specified number of periods have elapsed.

A deficiency in design occurs when a control necessary to achieve a specific control objective is either missing or not properly formulated, such that, even if the control operates as intended, the control objective is not consistently met.

A deficiency in operation occurs when a control, despite being correctly designed, fails to function as intended, or when the individual responsible for executing the control lacks the necessary authority or qualifications to perform it effectively.

A financial condition that occurs when liabilities exceed assets, or when expenditures surpass income, resulting in a shortage.

A retirement plan sponsored by an employer where employee benefits are computed using a formula that considers factors such as salary history and duration of employment. Employers are typically responsible for contributing to the plan and guaranteeing a specific retirement benefit amount, which is paid as a lifetime annuity to retirees.

A type of retirement plan in which the amount of the employer's annual contribution is specified. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts through employer contributions and, if applicable, employee contributions plus any investment earnings on the money in the account.

A decline in the prices of goods and services, typically indicating a decrease in the general price level within an economy. It is the opposite of inflation.

A trust that holds a real property, allowing it to qualify for a 1031 exchange and provide an opportunity for the investor to relinquished management responsibilities.

A loan that must be repaid in full either on demand by the lender or within a very short notice period.

Qualified expenses incurred for the care of dependents, such as children or disabled adults, that allow a taxpayer to claim a credit against their tax liability. These expenses must meet specific requirements set by tax regulations and can vary each tax year.

A method of accounting used to allocate the cost of extracting natural resources from the earth and reducing the asset's carrying value in a systematic manner over the period of its extraction.

A revenue recognition approach used under certain conditions where revenue and profit are deferred until the completion of a contract, primarily used when the outcome of a contract cannot be reliably estimated.

A non-cash accounting expense that allocates the cost of acquiring long-term assets over their useful life, representing the asset's wear and tear, obsolescence, or other declines in value over time.

Financial instruments whose value is derived from the performance of an underlying asset, such as a stock, bond, commodity, currency, or an index like interest rates.

A comprehensive financial report that outlines an entity's financial activities and holdings, detailing revenues, expenses, profits, and losses over a specific period.

The risk that an auditor will fail to identify a material misstatement in the financial statements.

Detective controls are mechanisms and procedures implemented within an organization's internal control system specifically designed to identify and flag errors, fraud, or compliance deviations after they have occurred.

Direct labor costs are the total expenses incurred for labor that is directly involved in the production of a product or the delivery of a service, which can be easily and economically traced to an end product.

A material that is incorporated as a fundamental part of a finished product and can be directly and economically traced to specific units of the product.

Direct overhead refers to the portion of overhead costs that are allocated directly to manufacturing processes, using a standard factor known as a burden rate or overhead application rate.

The act of paying out money from a fund or account, typically involving payment by cash, check, or electronic transfer.

A statement issued by an auditor when they are unable to express an opinion on the fairness of the financial statements due to significant limitations on the scope of their audit.

The process by which a company releases all relevant information pertaining to its business activities, ensuring that the content of financial statements is transparent and understandable to influence informed decision-making by stakeholders.

A component of a business that has been disposed of, or is classified as held for sale, and represents a separate major line of business or geographical area of operations.

A reduction from the full amount or value of an item, including prices or debts, often applied to promote sales, clear inventory, or manage debt repayments.

A bond that is sold for less than its face or redemption value.

The rate used to calculate the present value of future cash flows or the rate at which interest is reduced when a financial instrument is issued, sold, or lent.

The yield on a security that is sold at a discount from its face value, calculated as the investor's return on investment, expressed as a percentage of the face value.

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted to their present value using a discount rate.

A type of trust arrangement where the trustee is granted the authority to make investment decisions and manage the trust's assets according to the terms specified in the trust instrument.

Personal income remaining after all personal taxes and noncommercial government fees have been paid.

The process of officially terminating the existence of a corporation, typically involving the cessation of operations, liquidation of assets, and distribution of the remaining assets and liabilities.

Costs incurred by a company related to the marketing, selling, and delivery of goods and services to consumers.

Payments made by a business entity or fund to its owners or shareholders, which may include dividends from earnings, capital gains from the sale of portfolio holdings, or return of capital. These distributions can be in the form of cash, stocks, or other assets, and are often made periodically to distribute profits or realized gains.

The percentage of earnings paid to shareholders in cash, representing the proportion of a company's profit distributed as dividends to its shareholders.

Dividends are distributions of a corporation's earnings to its shareholders, which can be in the form of cash, other assets, or additional shares of the corporation's stock.

A liability recorded on a company's balance sheet representing the amount of earnings to be distributed to its shareholders.

A financial ratio that indicates the amount of cash dividends received from an investment relative to its market price per share. It is used to measure the current return on investment for a stockholder.

Dividends on cumulative preferred stock that have not been paid in the year they were due.

The final date by which all audit documentation must be assembled and completed, typically not more than 45 days after the audit report is released.

The imposition of two separate taxes on the same earnings, first as the net income of the corporation, and then as the dividends distributed to shareholders.

An accelerated depreciation method approved by the Internal Revenue Service (IRS) that allows depreciation at twice the rate of the straight-line method over the asset's useful life.

A method of recording financial transactions where each transaction is entered in at least two accounts, involving a two-way, self-balancing posting process where the total debits must equal total credits.

A written order signed by one party (drawer) instructing another party (drawee) to pay a specified sum to a third party (payee), either on demand (sight draft) or at a fixed future date (time draft).

The practice in an auditor's or accountant's report of using two different dates: the original date when the financial audit was completed, and a later date for any subsequent events that materially affect the financial statements and are disclosed in the report.

The specific date by which a task, obligation, or payment must be completed or submitted to avoid penalties such as fines or interest charges.

A comprehensive appraisal of a business or individual prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term more commonly applies to voluntary investigations. In the financial context, due diligence involves the examination and evaluation of a prospective investment or product to confirm all facts, such as reviewing all financial records, plus anything else deemed material.

An auction system in which the price of an item is gradually lowered until it meets a responsive bid and is sold.

A refundable tax credit provided by the U.S. federal government to eligible low-income workers, which varies based on the number of qualifying children and the worker's income, with specific phase-in and phase-out levels.

The Emerging Issues Task Force (EITF) assists the Financial Accounting Standards Board (FASB) by providing guidance on early identification of emerging issues affecting financial reporting and addressing problems in implementing authoritative pronouncements.

Earnings Per Share (EPS) is a financial metric calculated by dividing the net earnings of a company by the average number of shares outstanding during a specific period, indicating the company's profitability on a per-share basis.

An Employee Stock Ownership Plan (ESOP) is a stock bonus plan where employees acquire securities issued by their employer, enabling them to gain ownership interest in the company.

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

A refundable tax credit available to eligible low-income workers, which varies based on the number of qualifying children and the worker's income, with specific income thresholds determining the phase-in and phase-out of the credit amount.

A financial metric calculated by dividing a company's net earnings by the average number of shares outstanding during a specific period, indicating the amount of profit each share of stock generates.

The ratio of a company's Earnings Per Share (EPS) to its current stock price, used to evaluate the relative value of a company's shares.

Econometrics is the application of statistical and mathematical models to analyze economic data, aiming to test hypotheses and forecast future trends. It involves the use of techniques to describe the relationships between economic variables such as labor, capital, interest rates, and government policies.

The annual percentage increase in a country's gross national product (GNP), indicating the rate at which the country's economy is growing.

The social science that studies the production, distribution, and consumption of goods and services, and the various related economic theories and behaviors of individuals, households, and institutions.

A method of amortizing bond discounts or premiums by applying a constant interest rate to the carrying value of the bonds at the beginning of each interest period.