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.

In finance, funding refers to the process of refinancing a debt prior to its maturity, often through the issuance of bonds to raise capital. This process is also known as refunding.

A legally binding agreement to buy or sell a standardized quantity of a commodity or financial asset at a predetermined price at a specified time in the future.

The amount that an investment is expected to grow to by a specified future date when invested at a compound interest rate.

Generally Accepted Accounting Principles (GAAP) are the conventions, rules, and procedures that define accepted accounting practice in the United States, established by the Financial Accounting Standards Board (FASB).

Generally Accepted Auditing Standards (GAAS) are a set of systematic guidelines used by auditors when conducting audits on companies' finances, ensuring the accuracy, consistency, and verifiability of auditors' actions and reports.

The Government Accountability Office (GAO) is the auditing, evaluation, and investigative arm of the United States Congress. It is an independent, nonpartisan agency that reviews federal financial transactions and reports its findings directly to Congress.

The Governmental Accounting Standards Board (GASB) is the independent organization that establishes and improves standards of accounting and financial reporting for U.S. state and local governments.

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 fundamental accounting record used to chronologically document all financial transactions of a business, allowing for the initial entry of transaction data.

A comprehensive collection of a company's accounts that includes all assets, liabilities, equity, revenue, and expense transactions and balances.

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.

A set of conventions, rules, and procedures that define the accepted accounting practices in the United States at a particular time, established and updated by the Financial Accounting Standards Board (FASB).

Standards set by the American Institute of Certified Public Accountants (AICPA) that guide the auditor's professional qualities and judgment in the performance of audits and in the preparation of audit reports.

A transfer of property from one individual to another without any expectation of payment or compensation, which may be subject to gift tax regulations.

An accounting assumption that a business will continue to operate for the foreseeable future, without the need for liquidation or significant downsizing. This assumption implies that the entity has neither the intention nor the necessity to cease operations, curtail significantly the scale of its operations, or undertake a major reorganization.

The process by which a publicly traded company is transformed into a privately held entity. This occurs through the repurchase of shares by the company itself or acquisition by an outside private investor.

The process by which a privately held company offers its shares to the general public for the first time, typically through a stock exchange, involving registration with regulatory bodies such as the SEC.

The total quantity of goods that a company has available for sale to customers in a given period, calculated as the sum of the beginning inventory plus the net cost of purchases made during that period.

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.

Official legal documents that outline the rules, responsibilities, and structures under which an entity operates. For a corporation, these include articles of incorporation and bylaws; for a partnership, the partnership agreement; for a trust, the trust agreement or trust indenture; and for an LLC, the articles of organization and operating agreement.

The Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress, responsible for examining how taxpayer dollars are spent and providing Congress and federal agencies with objective, reliable information to help the government save money and work more efficiently.

The Governmental Accounting Standards Board (GASB) is the organization authorized to establish and improve standards of financial reporting for state and local government entities in the United States.

A person or entity to whom property, rights, or interests are legally transferred.

A grantor is an individual or entity that transfers property or creates a trust, and can also refer to a trader in the options market who earns premium income by selling options.

A practice where a shareholder holds a large block of a company's stock and threatens a takeover, compelling the company to repurchase the stock at a premium to avoid the takeover.

Gross income is the total income earned by an individual or a business from all sources before any deductions or taxes are applied.

The financial metric calculated by subtracting the cost of goods sold from net sales, representing the portion of sales revenue that exceeds the direct costs associated with producing the goods sold by a company.

The total amount of sales, both in cash and on credit, accumulated during a specific accounting period before any deductions are made.

A legal commitment by one party to fulfill the obligations of a second party to a third party, should the second party fail to meet their obligations.

In the context of mortgage-backed securities, half-life refers to the point in time at which half of the principal amount of the security has been repaid.

A tax filing status for individuals who are unmarried and provide more than half of the financial support for their household, which may include dependents or other qualifying relatives. This status offers more favorable tax rates and higher deductions compared to single filers.

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.

A technique used in cost accounting to separate fixed and variable costs associated with a business activity by analyzing the highest and lowest points of activity and their corresponding costs.

A type of bond that features a long-term maturity, offers a high premium for conversion into common stock, and provides a competitive interest rate.

The original cost of an asset to an entity at the time of its acquisition, recorded on the financial statements.

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

A tax credit available for the first two years of post-secondary education, providing a maximum credit of $1,500 per student per year, contingent upon meeting specific eligibility requirements.

A financial analysis technique that compares line items in financial statements over a series of periods, calculating both the dollar amount and percentage changes from one period to the next.

The International Accounting Standards Committee (IASC) was an independent private sector body, formed in 1973, with the objective of harmonizing accounting principles used globally in businesses and other organizations for financial reporting. It comprised members from 143 professional accounting bodies across 104 countries.

IMA, or the Institute of Management Accountants, is a professional organization comprised primarily of management accountants and finance professionals, dedicated to fostering the development of skills, knowledge, and professionalism in the field of management accounting.

An Initial Public Offering (IPO) is the process by which a private company offers shares to the public in a new stock issuance, allowing it to raise capital from public investors for the first time.

An Individual Retirement Account (IRA) is a personal savings plan which offers tax advantages to an individual for retirement savings. Contributions to a traditional IRA may be tax-deductible depending on the individual's income, tax filing status, and other factors, and the earnings on the contributions are not taxed until they are withdrawn.

The Internal Revenue Service (IRS) is a U.S. federal agency responsible for the administration of the Internal Revenue Code and the collection of taxes. It operates under the Department of the Treasury.

The Independence Standards Board (ISB) is a private sector standard-setting body that governs the independence of auditors from their public company clients, established through collaborations among the AICPA, other accounting representatives, and the SEC.

Expenditure directed to a particular asset to enhance its performance, efficiency, or useful life.

Imputed interest refers to interest that is considered or assumed to be charged on a loan or financial transaction, even if no interest or an unrealistic amount of interest is actually charged. This concept is used in tax and accounting to ensure that loans or financial transactions reflect a fair market interest rate.

A term used to describe payments that have not been made by their due date and are therefore overdue.

The inflow of revenue during a specific period of time, representing earnings from various sources such as wages, investments, and business operations.

A financial statement that summarizes the revenues, costs, and expenses incurred during a specific period, typically a fiscal quarter or year, reflecting the company's operating performance.

A temporary account used in the accounting closing process that aggregates all revenues and expenses for a period, facilitating the transfer of the resulting net income or loss to the capital account.

Income tax basis is a method of accounting that uses tax rules for reporting and is distinct from generally accepted accounting principles (GAAP). It determines the correct amount of gain or loss to report when an asset is sold, calculated as the cost of the asset plus improvements, minus any depreciation or amortization.

Income from operation, often referred to as operating income, is the profit realized from a business's core operating activities. It is calculated by subtracting operating expenses from gross margin.

The legal process by which a company receives a state charter, allowing it to operate as a corporation under the laws of the state in which it is incorporated.

The net cash inflows and outflows specifically attributable to a corporate investment project, reflecting the additional cash that will be generated or expended as a result of the project.

A formal and legally binding agreement, often in the context of bond issuance, between a bond issuer and the bondholders, which specifies the terms of the bond, the obligations of the issuer, and the rights of the bondholders.

A private sector standard-setting body that governed the independence of auditors from their public company clients, established through collaboration among the AICPA, other accounting representatives, and the SEC.

A member of the New York Stock Exchange who executes orders for other floor brokers who have more volume than they can handle, or for firms whose exchange members are not present on the floor.

A statistical composite that measures changes in the economy or financial markets, often expressed in percentage changes from a base year or from the previous month. Indexes track the performance and fluctuations of various sectors such as stock, bond, and commodities markets, using market prices and the weighting of components within the index.

Any cost that cannot be directly attributed to the production of specific goods or services and must be allocated to the cost objects using an appropriate method. These costs are not directly traceable to a specific department, product, or activity without effort or cost.

Labor costs associated with production-related activities that cannot be directly attributed or economically traced to a specific end product.

Costs in the production process that cannot be directly attributed to a specific product but are necessary for the manufacturing process. These costs include utilities, depreciation, and maintenance of equipment, among others.

Minor materials and other production supplies that are used in the manufacturing process but cannot be conveniently or economically traced to specific products.

The indirect method is a procedure used in financial reporting to convert the income statement from an accrual basis of accounting to a cash basis, focusing on the changes in cash flows from operating activities.

A personal savings plan that allows an individual to make cash contributions, which may be tax-deductible depending on the individual's adjusted gross income and participation in an employer's retirement plan. The earnings in the account are tax-deferred, meaning they are not taxable until withdrawal.

The rate at which the general level of prices for goods and services is rising, often measured as an annual percentage increase. This typically occurs when spending increases relative to the supply of goods on the market, leading to a decrease in the purchasing power of money.

The rate at which the general level of prices for goods and services is rising, and subsequently, eroding purchasing power.

Inheritance refers to property or assets acquired through the laws of descent and distribution when a person dies without a will. The value of the inherited property itself is excluded from the taxpayer's gross income, but any income generated from the property is included. The basis of the inherited property for tax purposes is its fair market value at the time of the original owner's death.

The process by which a private company offers shares to the public in a new stock issuance, allowing it to raise capital from public investors for the first time.

A procedure that involves seeking both financial and non-financial information from knowledgeable individuals within or associated with a company, often used in auditing to complement other procedures. Inquiries can range from formal written requests to informal oral questions.

Confidential knowledge about the internal affairs or operations of a corporation that has not yet been made public and could influence an investor's decision to buy or sell stock.

The condition where an entity cannot meet its financial obligations as they come due because its liabilities exceed its assets.

A state where an entity's liabilities exceed its assets, rendering it unable to meet its debt obligations.

A tax accounting method where the gain on the sale of an asset exchanged for a receivable is reported as payments are received.

A professional organization comprised of individuals working in the field of management accounting, dedicated to fostering the professional development of its members and promoting best practices in financial and management accounting.

A legal document or financial tool used for a specific purpose, such as executing transactions, paying for goods or services received, or fulfilling other contractual obligations.

A financial system in which individuals or entities pay premiums to an insurance company that compensates them in the event of a specified loss, damage, illness, or death, under the terms of an insurance policy.

An account held at a financial institution such as a bank, credit union, or brokerage firm that is covered by a federal or private insurance organization to protect the funds against the institution's failure.

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.

A financial metric used to determine how easily a company can pay interest on its outstanding debt, calculated by dividing the company’s earnings before interest and taxes (EBIT) by its interest expenses.

The percentage at which interest is charged or paid on the use of money, typically expressed as an annual percentage rate.

A dividend declared and paid by a company before its annual earnings have been calculated, typically distributed on a quarterly basis.

Financial statements that report the operations of an entity for a period shorter than one fiscal year, typically to provide an update on the company's financial status between annual reports.

An audit conducted by a company's own staff to assess and improve the effectiveness of risk management, control, and governance processes within the organization.

A process designed by an organization's management to provide reasonable assurance regarding the achievement of objectives in the effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.

A process designed by, or under the supervision of, a company's principal executive and principal financial officers, or those performing similar functions, and implemented by the company's board of directors, management, and other personnel. This process is aimed at providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Generally Accepted Accounting Principles (GAAP). It includes policies and procedures that ensure the maintenance of records reflecting accurate and fair transactions and dispositions of assets, authorize receipts and expenditures, and prevent or detect in a timely manner unauthorized access to or use of the company's assets that could materially affect the financial statements.

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.

The comprehensive set of tax laws and regulations enacted by the federal government, codified as Title 26 of the United States Code, governing federal tax obligations and procedures.

The federal agency within the United States Treasury Department responsible for the administration and enforcement of the federal tax laws, including the collection of personal and corporate income taxes, Social Security taxes, excise, and gift taxes.

An independent private sector organization established in 1973, aimed at harmonizing accounting principles used globally in businesses and other organizations for financial reporting. It comprises members from 143 professional accounting bodies across 104 countries.

A mutual fund that invests in securities markets across various countries, allowing investors to diversify their portfolio internationally and potentially gain returns from different markets.

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.

Inventory refers to tangible property held by a company for sale or the materials used in the production process to create products. This includes raw materials, work-in-progress, and finished goods that are valued by various methods such as FIFO (First in, First out) or LIFO (Last in, First out) to accurately reflect their cost or market value on financial statements.

A financial arrangement where loans are provided to businesses secured by their inventory, often in anticipation of future sales. This type of financing is used to increase liquidity for operations or to fund additional inventory purchases.

A financial ratio that measures the number of times a company's inventory is sold and replaced over a specific accounting period, indicating the efficiency of inventory management.

To allocate money or capital to an asset, project, company, or financial product with the expectation of earning a positive financial return or profit over time.

The practice of allocating resources, usually money, with the expectation of generating an income or profit. This can include purchasing assets like stocks, bonds, real estate, or other investments that are expected to provide returns through income or price appreciation.

The allocation of capital or expenditure on resources with the expectation of generating a return, profit, or benefit over time.

A professional or firm that acts as an intermediary between securities issuers and the investing public, often serving as an underwriter or agent in the issuance of securities.