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.

A partnership is a business structure involving two or more individuals who agree to carry on a trade or business together, sharing in profits and liabilities. Partnerships can vary in terms of liability exposure, with general partners typically having unlimited liability, while limited partners may have liability only up to the amount they invest.

A financial loss generated from business activities in which the taxpayer does not materially participate, often used in the context of rental properties or other business investments where the investor is not actively involved.

Income derived from investments such as dividends, interest, royalties, rents, and income from personal service contracts, as well as distributions from estates or trusts, where the recipient is not actively involved in the generation of this income.

Patronage dividends are amounts paid by a cooperative to its members or customers, reflecting the proportion of the cooperative's profit earned or business conducted by each member during a tax year.

In capital budgeting, the payback period is the length of time required to recover the cost of an investment. It calculates the time needed for the cash inflows from a capital investment project to equal the cash outflows.

A capital budgeting technique that determines the time required to recoup the initial investment in a project, calculated by dividing the initial investment by the annual cash inflow.

The percentage of a firm's earnings distributed to shareholders in the form of dividends.

A process in which the practices of an accounting firm are evaluated for compliance with professional standards, typically conducted by independent reviewers from the same profession.

A financial or legal sanction imposed by a government agency or regulatory authority on a taxpayer for failing to comply with legal requirements, such as not performing a specific act or omitting vital information on a tax return.

A retirement plan offered by an employer that provides financial benefits to employees upon retirement. The plan is managed through a trustee who controls the plan's assets.

An interval of time with a specified length or characterized by certain conditions.

A method of inventory valuation for financial reporting purposes where a physical count of the inventory is performed at predetermined intervals, such as at the end of each fiscal year, to determine the quantity on hand.

Periodicity in accounting refers to the recognition that net income for any period less than the life of the business, although tentative, is still a useful estimate of net income for that period.

A system that maintains a continuous, real-time record of all inventory items, tracking each receipt and withdrawal to ensure accurate and current inventory data.

The process of creating a strategy to address an individual's personal, business, and financial goals and concerns, typically involving budgeting, investment management, tax planning, and retirement planning.

A certified public accountant who specializes in personal financial planning and meets specific requirements including education, experience, ethics, and an examination.

Financial statements prepared for an individual or family to show their current financial status, detailing assets, liabilities, income, and expenses.

Personal property refers to movable assets that are not permanently attached to or part of real estate. This includes both tangible items such as vehicles, furniture, and electronics, and intangible items such as stocks, bonds, patents, and copyrights.

A small amount of cash that a company keeps on hand to pay for minor, everyday expenses in an office.

Income reported for tax purposes but for which no actual cash or tangible financial benefit is received by the taxpayer.

An actual count of all merchandise on hand at the end of an accounting period, conducted to verify stock records and account balances.

In accounting, a plant refers to the fixed assets of a business, including land, buildings, machinery, and all equipment permanently employed for production or operational purposes.

An asset that is placed in trust and used as collateral to secure a debt obligation.

An accounting method used to account for mergers or acquisitions where the acquiring company issues its common stock in exchange for the common stock of the acquired company, under specific criteria that allow the combined financial statements to be presented as if the companies had always been a single entity.

A collection of various investments held by an individual or institutional investor, including stocks, bonds, commodities, real estate investments, cash equivalents, or other assets.

A trial balance prepared at the end of an accounting period after all adjusting and closing entries have been posted, serving as a final verification of the balance of the ledger.

Benefits such as pensions, health care, life insurance, and other supports that an employer provides to retirees, their dependents, or survivors.

A rate calculated before the beginning of an accounting period that is used to estimate and allocate overhead costs to products or jobs based on expected conditions and cost drivers.

A right granted to existing shareholders to purchase additional shares of a new issue of stock before it is offered to the general public, allowing them to maintain their proportional ownership in the company.

A type of capital stock that carries certain preferences over common stock, including priority in dividend payments and claims on assets in the event of liquidation.

In finance, a premium refers to the amount by which the price of a security, such as a bond, option, or futures contract, exceeds its intrinsic or face value. In insurance, it is the cost paid for coverage over a specified period.

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

An agreement between a future husband and wife that details how the couple’s financial affairs are to be handled both during the marriage and in the event of divorce.

Costs incurred for goods or services that are expected to provide economic benefits within the future operating cycle, recorded as assets on the balance sheet until they are consumed or used.

The current value of a future cash flow stream, discounted at a specific rate to account for the time value of money.

Controls implemented to avert errors or fraudulent activities that could lead to inaccuracies in the financial statements.

The high and low prices at which a stock or other financial instrument has traded over a specific period of time.

A financial metric used to evaluate the relative valuation of a company, calculated by dividing the current market price per share by the earnings per share (EPS). This ratio indicates how much investors are willing to pay per dollar of earnings, providing insight into investor confidence and stock profitability.

The ratio of earnings available to common stockholders divided by the number of common shares outstanding.

The interest rate charged by major U.S. banks on loans made to their most creditworthy customers, often used as a benchmark in lending.

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 method of raising capital through the sale of securities to a relatively small number of select investors as part of an offering that is not made to the general public and is exempt from the typical registration requirements of regulatory authorities.

A right or immunity granted as a peculiar benefit or advantage, often specific to a particular person or group.

A legal doctrine that determines the parties who have the right to enforce a contract or be sued for its breach, based on their direct involvement and interest in the contract.

A presentation of financial information that anticipates the impact of an expected or hypothetical event such as a merger, acquisition, or change in capital structure.

Distribution of an expense, fund, or dividend in proportion to ownership or entitlement.

A group of related products manufactured by a company, each serving a similar market sector or fulfilling a particular type of customer need.

The act or process of creating goods or services, which can include a defined portion of the proceeds of production up to a dollar amount in the context of project financing.

Profit is the financial gain realized when the revenue generated from business activities exceeds the expenses, costs, and taxes involved in sustaining the activity.

A financial metric used to assess the profitability of a business, calculated as the percentage of revenue that exceeds the costs of goods sold and results in net income.

A pricing strategy in which the price of a product is set based on a predetermined profit margin added to the total costs and expenses incurred in producing the product.

A defined contribution plan where a portion of an entity's profits is allocated to individual participant accounts, typically benefiting employees by allowing them to share in the company's profitability.

The ability of a business or investment to generate a sufficient income or return to attract and maintain capital investment.

Prospective financial statements that forecast the future performance of a company, country, or other entity, using one or more hypothetical assumptions and based on historical and current information.

A written, legally binding document in which one party promises to pay a specific amount of money to another party under specified conditions, including a set interest rate and maturity date. The note may be secured by collateral or unsecured.

Long-term tangible assets that are used in the continuing operation of a business and are expected to provide benefits for more than one year.

An unincorporated business owned and operated by a single individual, who has complete liability for all assets and rights to all profits, without the limited liability protection of a corporation or a limited liability company (LLC).

Prospective Financial Information includes financial forecasts and projections, which present an entity's expected financial position, results of operations, and changes in financial position based on assumptions about future events. A financial forecast is based on the responsible party's assumptions reflecting expected conditions and planned actions. A financial projection, however, is based on hypothetical assumptions, showing potential financial outcomes under different scenarios.

A formal written document that is part of the registration statement filed with the Securities and Exchange Commission (SEC) for public offerings. It describes the securities or partnership interests to be issued and sold, detailing the business plan, fund objectives, risks, and other essential information necessary for investors to make informed decisions.

A proxy is an authorization, either written or electronic, that allows someone other than the shareholder to vote on the shareholder's behalf, often delegating the voting rights to management or a designated representative.

A private-sector, non-profit corporation established by the Sarbanes-Oxley Act of 2002, tasked with overseeing the auditors of public companies to protect the interests of investors and ensure the public interest in the preparation of informative, fair, and independent audit reports.

The process of offering shares of a private corporation to the public in a new stock issuance, typically through filings with the Securities and Exchange Commission (SEC).

The Public Oversight Board (POB) is an independent entity composed of public members that oversees and evaluates peer reviews and other regulatory activities conducted by the SEC Practice Section (SECPS) of the AICPA's Division for CPA Firms.

An accounting approach for a merger where the assets of the acquired company are added to the acquiring company's balance sheet at the price paid for them, reflecting the total cost of acquisition.

A written authorization issued by a buyer to a vendor, requesting the delivery of specified goods or services at a stipulated price.

In accounting, particularly under the periodic inventory system, 'purchases' refers to the total cost of all merchandise acquired for resale during a specific accounting period. This account is used to track the expenses related to acquiring inventory that will later be sold.

Discounts taken by a buyer from a supplier as an incentive for early payment of their invoice, typically related to merchandise purchased for resale.

A contra account used under the periodic inventory system that records cash refunds, credits on account, and allowances granted by suppliers for returned, unsatisfactory, or incorrect merchandise originally purchased for resale.

An accounting method where the financial values resulting from an acquisition are transferred or 'pushed down' to the accounts of the acquired company, reflecting the new basis established in the acquisition.

A put is a type of option contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.

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.

Relating to, measuring, or measured by the quality of something rather than its quantity.

Analysis that evaluates important factors that cannot be precisely measured, focusing on the quality and characteristics of the subject matter rather than numerical data.

The degree to which a product or service meets or exceeds customer expectations by consistently achieving desired specifications and standards.

Analysis that focuses on measurable and quantifiable factors such as financial metrics, statistical data, and mathematical models, often used to predict outcomes or assess financial performance.

An amount or number of a specific item or category.

A quarter refers to one of four three-month intervals in a year, commonly used in financial and business contexts to divide the fiscal or calendar year for reporting purposes.

Quarterly reports, also known as interim financial statements, are financial statements issued by companies every three months to provide a periodic update on their financial health, including revenues, expenses, net profit, and cash flow, during the fiscal year.

A type of corporate restructuring in which, with shareholder approval, management revalues assets and eliminates deficit by adjusting it against other equity accounts, effectively resetting the financial structure of the company without forming a new corporate entity or requiring court intervention.

Quick assets are current assets that are either cash or can be quickly converted into cash, typically within a short period, such as cash on hand, marketable securities, and accounts receivable.

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.

Research and Development (R&D) refers to the systematic activities companies undertake to innovate and introduce new products and services or to improve their existing offerings. Research is the pursuit of new knowledge and understanding that could lead to new products, whereas development is the application of research findings or other knowledge into a plan or design for new or substantially improved products or processes.

A Real Estate Investment Trust (REIT) is an investor-owned trust that invests in real estate properties and offers unique tax advantages. Instead of paying corporate income tax, a REIT distributes most of its income directly to its shareholders who then report this income on their individual tax returns.

A Real Estate Mortgage Investment Conduit (REMIC) is a special purpose vehicle that holds a fixed pool of mortgages and issues multiple classes of interests, or tranches, to investors. A qualified REMIC is generally taxed like a partnership, provided it does not accept contributions after its start-up day or engage in prohibited transactions.

A Regulated Investment Company (RIC) is a domestic corporation that operates as an investment agent for its shareholders by investing in government and corporate securities and distributing the dividends and interest income earned from such investments. To qualify as a RIC, a corporation must make an irrevocable tax election to be treated as such under specific regulatory conditions.

Return on Investment (ROI) is a financial ratio that measures the profitability of an investment as a percentage of the original cost. It is calculated by dividing the net income from the investment by the initial cost of the investment.

The percentage of profit or interest earned on an investment over a specific period, reflecting the efficiency and profitability of the investment.

A financial analysis technique that involves comparing different financial statement items of a company to identify trends, relationships, and financial health. Ratio analysis is used to evaluate various aspects of a company's operating and financial performance such as its efficiency, liquidity, profitability, and solvency.

Raw materials are basic, unprocessed substances or components used in the manufacturing process to produce finished goods.

An account on the balance sheet that represents the total cost of raw materials that are intended for use in production but have not yet been utilized in the manufacturing process.

Real estate refers to a piece of land along with any permanent improvements attached to the land, including buildings, houses, fences, and other structures, as well as the rights associated with the air above and the earth below the property.

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-generating real estate. REITs provide a way for individual investors to earn a share of the income produced through commercial real estate ownership without actually having to buy, manage, or finance any properties themselves.

A pass-through tax entity that holds a fixed pool of mortgages secured by real property and issues multiple classes of ownership interests to investors. These interests may be in the form of pass-through certificates, bonds, or other legal forms. A REMIC is generally taxed like a partnership and was created under the Tax Reform Act of 1986.

Income of an individual, group, or country, adjusted for changes in purchasing power due to inflation, reflecting the actual buying power of the income.

The interest rate adjusted for inflation, calculated by subtracting the inflation rate from the nominal interest rate. This rate reflects the true cost of borrowing and the real yield to investors.

Land and any permanent structures or improvements affixed to the land, including buildings and fixtures, that are considered an inherent part of the property and are customarily transferred with the land.

The return on an investment after adjusting for inflation, reflecting the actual purchasing power of the amount returned.

The process of converting an asset into cash, typically through a sale.

Profit or loss resulting from the sale or other disposal of a security or asset, which is recognized when the transaction is completed and the financial outcome is known.