Glossary

Accounts receivable that are uncollectible used in accrual method accounting.

Amount arrived at by adding all debits and subtracting all credits to ensure total debits equal the total credits.

Statement, at a particular point in time, of the financial position of a business or organization. This is generally divided into three parts: assets, liabilities and ownership, or equity. Also known as Statement of Financial Position.

A type of mortgage with a final payment that is considerably larger than the preceding payments, typically used when borrowers anticipate receiving a large sum of cash to pay the balance or when they expect to refinance before the final payment.

Balance of a bank account when funds withdrawn exceed funds deposited.

Analysis that accounts for the difference between the balance shown on the bank statement and the balance shown in the accounting records on a given date.

Legal status of a person/corporation who/which is unable to pay its debts as they become due and who/which has made a transfer of property or of a right or interest in property to a trustee for the benefit of creditors.

The state of being insolvent or unable to pay outstanding debt. Declaring bankruptcy is expensive, and it can have adverse effects on one's credit in the future. These are some common ways to apply for bankruptcy.

The total original cost (including any additional outlays) of an equity investment or a piece of property. This is used by the Internal Revenue Service to compute taxable gain, profit, or appreciation.

A measurement of variation in financial instruments, equal to .01%. For example, a yield that has increased from 8.97% to 9% has increased by 3 basis points.

An extended period during which market prices decline. The opposite of a bull market.

The person or entity named in a will, life insurance policy, qualified retirement plan, or annuity who will receive benefits upon the death of the insured or the plan participant.

When people pay taxes according to the amount of government aid (benefits) they receive. Examples of benefits the American public receives include (to name only a few): welfare, child care, Medicare and Medicaid. Some people believe it is only fair that people pay taxes based on the amount of government aid they receive.

A measure of a security's price volatility relative to an appropriate market index. For example, the S&P 500 index is considered to have a beta of 1; stocks with betas greater than 1 experience more price fluctuations than that index, while the prices of stocks with betas less than 1 fluctuate less often.

Written document issued by the carrier of goods. Also, a receipt for goods and a contract to deliver goods.

The common stock of a company with a reputation for quality and a long history of earnings growth and dividend payments, such as General Electric, IBM, or DuPont.

A debt security issued by a corporation, government, or governmental agency that obligates the issuer to pay interest at predetermined intervals and repay the principal at maturity. A bond's face value is the amount of money the holder will receive when the bond matures. The face value does not change, but the bond's market value may fluctuate before maturity.

A journal in which transactions are recorded for the first time before summarizing or posting to ledger accounts. For example, purchase journals, cash receipts journals, accounts payable journals, disbursements journals, general journals and payroll journals are all books of original entry. See General Journal and Journal.

(1) The current value of a fixed asset as shown by the records; the difference between the original cost of the asset and the accumulated depreciation. (2) The difference between the accounts receivable and the allowance for bad debts. (3) The value of a share of stock as shown by the corporate books.

The recording of financial transactions electronically or manually. The record-keeping part of the accounting process.

A financial professional who facilitates the trading of services or property such as securities, real estate, insurance, or commodities.

A report of projected income and expenses for a given period.

An extended period of rising security prices in financial markets. The opposite of a bear market.

A plan for the future transfer of a business entity, involving legal, financial, tax, and family concerns.

A government levy on income for businesses.

An investment strategy that advocates holding securities for the long term and ignoring short-term price fluctuations.

A contract that provides for the purchase of all outstanding shares from a business owner. Generally, such contracts allow for a different ownership structure in the future.

Bylaws are the rules and regulations adopted by a corporation for its internal governance. It usually contains provisions relating to shareholders, directors, officers and general corporate business. At the corporation's initial meeting the bylaws are adopted. Bylaws are a private document not filed with any state authority. Bylaws are more flexible than the articles of incorporation because they are easier to amend.