The agreement may involve the transfer of ASSETS in full or partial satisfaction of the debt. The act of transacting, especially a business agreement or exchange; event or condition recognized by an entry in the book ACCOUNT. Taxable income is generally equal to a taxpayer’s ADJUSTED GROSS INCOME during the TAX YEAR less any allowable EXEMPTIONS and deductions. ASSETS having a physical existence, such as cash, land, buildings, machinery, or claims on property, investments or goods in process. An accelerated method of DEPRECIATION in which the depreciable value if an ASSET is multiplied by a decreasing fraction each year of the asset’s useful life.
- Another type of accounting fraud takes place when a company does not record its expenses.
- As distinguished from a BEQUEST or devise, an inheritance is property acquired through laws of descent and distribution from a person who dies without leaving a will.
- For tax purposes, these types of transactions are generally subject to a greater level of scrutiny.
- Price paid by a real estate limited partnership, when acquiring a lease, including legal fees and related expenses.
Concept in statutes and regulations whereby a person who meets listed requirements will be preserved from adverse legal action. Frequently, safe harbors are used where a legal requirement is somewhat ambiguous and carries a risk of punishment for an unintended violation. DEBTOR’S legal right, to discharge all or a portion of the DEBT owed to another party by applying against the debt an amount that the other party owes to the debtor.
Premium Bond
Any loss of an asset due to fire storm act of nature causing asset damage from unexpected or accidental force. Generally it is deductible regardless of whether it is business or personal. A multicolumn journal used to record business transactions involving the receipt of CASH from other individuals or businesses. A way of measuring the ability of sales to generate operating CASH FLOWS. Short-term (generally less than three months), highly liquid INVESTMENTS that are convertible to known amounts of cash. Distribution of a CORPORATION’s earnings to stockholders in the form of CASH.
The act of taxing corporate earnings twice, once as the NET INCOME of the CORPORATION and once as the DIVIDENDS distributed to stockholders. Rate at which INTEREST is deducted in advance 3 ways to write a receipt of the issuance, purchasing, selling, or lending of a financial instrument. Also, the rate used to determine the CURRENT VALUE, or present value, of an ASSET or incomestream.
- An expense that has occurred but is not recognized in the accounts.
- Controls that exist at the company level that have an impact on controls at the process, transaction, or application level.
- Used as an indicator of a COMPANY’s liquidity and ability to pay short-term debts.
- E) Out of the Money option – Option granted with an exercise price above the market price.
- It participates with the FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) and the GOVERNMENT ACCOUNTING STANDARDS BOARD (GASB) in establishing accounting principles.
A periodic statement, usually monthly, that a bank sends to the holder of a checking account showing the balance in the account at the beginning of the month, during, and at the end of the month. A way of arriving at the cost of inventory that computes the average cost of all goods available for sale during a fixed period in order to determine the value of inventory. Maximum number of shares of any class a company may legally create under the terms of its articles of incorporation. A trial balance prepared after all adjusting entries have been recorded and posted to the accounts. INTEREST that has accumulated between the most recent payment and the sale of a BOND or other fixed-income security.
Tangible Asset
The ability to increase earnings for stockholders by earning more on ASSETS than is paid in INTEREST on DEBTincurred to finance the assets. ACCOUNTING method of valuing INVENTORY under which the costs of the first goods acquired are the first costs charged to expense. Person who is responsible for the administration of property owned by others. Corporate management is a FIDUCIARY with respect to corporate ASSETS which are beneficially owned by the stockholders and CREDITORS.
The transferor was INSOLVENT at the time or was rendered insolvent by that transfer or related series of transfers. The U.S. Tax Court is a legislative court functioning to adjudicate controversies between taxpayers and the IRS arising out of deficiencies assessed by the IRS for INCOME, GIFT, ESTATE, windfall profit and certain EXCISE TAXES. It has no jurisdiction over other taxes such as employment taxes. Financial contract in which two parties agree to exchange net streams of payments over a specified period.
Retail Method
It came about from discussions between the AICPA, other accounting representatives and the SEC. Formal agreement, also called a deed of trust, between an issuer of bonds and the BONDHOLDER covering certain considerations such as form of the BOND for example. Summary of the effect of REVENUES and expenses over a period of time. A professional organization made up primarily of management accountants. A DEBT SECURITY that management intends to hold to its MATURITY or payment date and whose cash value is not needed until that date.
Individual or firm that extends money to a borrower with the expectation of being repaid, usually with INTEREST. Doctrine that interference of government in business and economic affairs should be minimal. Writing checks against a bank account with insufficient funds to cover them, hoping that the bank will receive deposits before the checks arrive for clearance.
Forecasted Income Statement
(1) Costs, excluding acquisition costs, incurred to bring a new unit into production. A person entering into a short sale believes the price of the item will decline between the date of the short sale and the date he or she must purchase the item to deliver the item under the terms of the short sale. Total amount of shares of stock that have been sold short and have not yet been repurchased to close out short positions. Organized, national EXCHANGES where securities, options, and futures contracts are traded by members for their own accounts and for the accounts of customers.
Educational programs for CERTIFIED PUBLIC ACCOUNTANTS (CPAs) to keep informed on changes that occur within the profession. State Boards for Public Accountancy and the AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA) each have separate CPE requirements. Goods bought for personal or household use, as distinguished from capital goods or producer’s goods, which are used to produce other goods. AUDITOR’S receipt of a written or oral response from an independent third party verifying the accuracy of information requested. Organization engaged in business as a PROPRIETORSHIP, PARTNERSHIP, CORPORATION, or other form of enterprise.
Earned Income
Now suppose the CEO of a publicly-traded company knowingly makes false statements about the firm’s prospects. The Securities and Exchange Commission (SEC) may well charge that CEO with fraud. However, it is not accounting fraud because no financial records were falsified.
The auditor is required to disclaim depending on the limitation in scope. This exists when a control necessary to meet the control objective is missing or an existing control is not properly designed so that even if the control operates as designed, the control objective is not always met. Default triggers a CREDITOR’S rights and remedies identified in the agreement and under the law. Authorize the payment of DIVIDEND on a specified date, an act of the BOARD OF DIRECTORS of a CORPORATION. Method of ACCELERATED DEPRECIATION, approved by the INTERNAL REVENUE SERVICE (IRS), permitting twice the rate of annual DEPRECIATION as the STRAIGHT-LINE DEPRECIATION method. A BOND that is usually not registered with the issuing CORPORATION but instead bears interest coupons stating the amount of INTEREST due and the payment date.
Standard rate used to calculate the OVERHEAD cost of a given activity. The act or an instance of purchasing essential products or services from another COMPANY. An amount of something produced, especially during a given period of time.
An overall operating philosophy of INVENTORY management in which all resources, including materials, personnel, and facilities, are used only as needed. When two or more persons or organizations gather CAPITAL to provide a product or service. A customer order for a specific number of specially designed, made-to-order products. If the IRS believes that collection of tax appears to be in jeopardy (danger of being uncollected), it may immediately assess and collect such tax.