Accounting Glossary F-K
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Accounting Terminology Guide F-K A | B |C |D |E | F | G| H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z 401(k) Plan - EMPLOYEE BENEFIT PLAN authorized by INTERNAL REVENUE CODE section 401(k), whereby an employer establishes an account for each participating employee and each participant elects to deposit a portion of his or her salary into the account. The amount deposited is not subject to income tax. This is the most common type of salary reduction plan. Face Value - Amount due at maturity from a BOND or note. Factoring - Selling a RECEIVABLE at a discounted value to a third party for cash. FASB - See FINANCIAL ACCOUNTING STANDARDS BOARD (FASB). Fair Market Value - Price at which property would change hands between a buyer and a seller without any compulsion to buy or sell, and both having reasonable knowledge of the relevant facts. Favorable Variance - Excess of actual REVENUE over projected revenue, or actual costs over projected costs. Fiduciary - 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. Similarly, a TRUSTEE is the fiduciary of a TRUST and partners owe fiduciary responsibility to each other and to their creditors. FIFO - See FIRST IN, FIRST OUT. Filing of Returns - Taxpayers meeting statutory requirements MUST file various returns on the prescribed forms. And they must be filed timely or the y may not be considered as filed. Financial Accounting Standards - Official promulgations, known as STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS, by the FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) which are part of GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) in the United States. Financial Accounting Standards Board (FASB) - Independent, private, non-governmental authority for the establishment of ACCOUNTING principles in the United States. Financial Institution - Organization engaged in any of the many aspects of finance including commercial banks, thrift institutions, investment banks, securities brokers and dealers, credit unions, investment companies, insurance companies, and REAL ESTATE INVESTMENT TRUSTS. Financial Statements - Presentation of financial data including BALANCE SHEETS, INCOME STATEMENTS and STATEMENTS OF CASH FLOW, or any supporting statement that is intended to communicate an entity's financial position at a point in time and its results of operations for a period then ended. First in, First out (FIFO) - ACCOUNTING method of valuing INVENTORY under which the costs of the first goods acquired are the first costs charged to expense. Commonly known as FIFO. Fiscal Year - Period of 12 consecutive months chosen by an entity as its ACCOUNTING period which may or may not be a calendar year. Fixed Asset - Any tangible ASSET with a life of more than one year used in an entity's operations. Floor - Term used when discussing INVENTORIES. Inventory cannot be valued lower than the "floor" which is the net realizable value of the inventory less an allowance for a normal profit margin. Forecast - Prospective FINANCIAL STATEMENTS that are an entity's expected financial position, results of operations, and cash flows. Foreclosure - Seizure of COLLATERAL by a CREDITOR when DEFAULT under a loan agreement occurs. Foreign Corporation - A corporation which is not organized under the laws of ones territories or states. Taxing of foreign corporations depends on whether the corporation has Nexus or effectively connected income in that state. Foreign Currency Translation - Restating foreign currency in equivalent dollars; unrealized gains or losses are postponed and carried in Stockholder's Equity until the foreign operation is substantially liquidated. Foreign Tax Credit - A U.S. taxpayer that pays or accrues income tax to a foreign country may elect to credit or deduct these taxes in a determinable us dollar amount. This is usually done on the annual individual tax return and there is s specific form provided for this. Form 8-K - SEC filing which is a filing that must be made on the occurrence of an event that is deemed to be of significant importance to SECURITY holders. Form 10-K - SEC filing which is the ANNUAL REPORT due 90 days after the registrant's BALANCE SHEET date. Form 10-Q - SEC filing which is the quarterly report due 45 days after each of the first three quarter.ends of each fiscal year. Franchise - Legal arrangement whereby the owner of a trade name, franchisor, contracts with a party that wants to use the name on a non-exclusive basis to sell goods or services, franchisee. Frequently, the franchise agreement grants strict supervisory powers to the franchisor over the franchisee which, nevertheless, is an independent business. Fraud - Willful misrepresentation by one person of a fact inflicting damage on another person. Fund Accounting - Method of ACCOUNTING and presentation whereby ASSETS and LIABILITIES are grouped according to the purpose for which they are to be used. Generally used by government entities and not-for-profits. (See RESTRICTED FUND and UNRESTRICTED FUND.) Future Contract
- Transferable agreement to deliver or receive during a specific
future month a standardized amount of a commodity. GAAP - See GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. GAAS - See GENERALLY ACCEPTED AUDITING STANDARDS. Gain - Excess of REVENUES received over costs relating to a specific transaction. GAO - See GENERAL ACCOUNTING OFFICE. GASB - See GOVERNMENTAL ACCOUNTING STANDARDS BOARD. General Accounting Office (GAO) - Accounting and auditing office of the United States government. An independent agency that reviews federal financial transactions and reports directly to Congress. General Ledger - Collection of all ASSET, LIABILITY, owners EQUITY, REVENUE, and expense accounts. General Partnership - PARTNERSHIP with no limited partners. (See LIMITED LIABILITY PARTNERSHIP and LIMITED PARTNERSHIP.) Generally Accepted Accounting Principles (GAAP) - Conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. The highest level of such principles are set by the FINANCIAL ACCOUNTING STANDARDS BOARD (FASB). Generally Accepted Auditing Standards (GAAS) - Standards set by the AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA) which concern the AUDITOR'S professional qualities and judgment in the performance of his or her AUDIT and in the actual report. Gift - A valid transfer of property from one taxpayer to another without consideration or compensation. A gift may be subject to the unified estate and gift transfer tax. Going Concern - Assumption that a business can remain in operation long enough for all of its current plans to be carried out. Going Public - Activities that relate to offering a private company's shares to the general investing public including registering with the SEC. Goodwill - Premium paid in the acquisition of an entity over the fair value of its identifiable tangible and intangible ASSETS less LIABILITIES assumed. Governing Documents - Official legal documents that dictate how an entity is operated. The governing documents of a CORPORATION include ARTICLES OF INCORPORATION and BYLAWS; a PARTNERSHIP includes the partnership agreement; a TRUST includes the trust agreement or trust indenture; and an LLC includes the ARTICLES OF ORGANIZATION and OPERATING AGREEMENT. Governmental Accounting Standards Board (GASB) - Group that has authority to establish standards of financial reporting for all units of state and local government. Grantee - Person to whom property is transferred. Grantor - (1) Person who transfers property. (2) Person who creates a trust. Greenmail - Any amount a corporation pays to a shareholder to directly or indirectly buy back its stock. Gross Income - The beginning point for the determination of income, including income from whatever sources derived. (Also see ADJUSTED GROSS INCOME.) Guaranty
- Legal arrangement involving a promise by one person to perform
the obligations of a second person to a third person, in the event
the second person fails to perform. Head of Household - An individual entitled to special tax rates that fall midway between single rates and married filing joint rates, if they fit the qualifying profile. Hedge - A financial term for a specific type of commodities planning and trading. Historical cost - Original cost of an asset to an entity. Holding Period - The time in which a taxpayer acquires property and the date on which it is sold. Hope Scholarship
Credit - A maximum allowable credit of $1,500 per student for
each of the first 2 years of post-secondary education. It is allowable
after all additional requirements are met. Improvement - EXPENDITURE directed to a particular ASSET to improve its performance or useful life. Income - Inflow of REVENUE during a period of time. (See NET INCOME.) Income Statement - Summary of the effect of REVENUES and expenses over a period of time. Income Tax Basis - (1) For tax purposes, the concept of basis determines the proper amount of gain to report when an ASSET is sold. Basis is generally the cost paid for an asset plus the amounts paid to improve the asset less deductions taken against the asset, such as DEPRECIATION and AMORTIZATION. (2) For accounting purposes, a consistent basis of accounting that uses income tax accounting rules while GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) does not. (See OTHER COMPREHENSIVE BASIS OF ACCOUNTING.) Independence Standard Board, the (ISB) - is the private sector standard- setting body governing the independence of auditors from their public company clients. It came about from discussions between the AICPA, other accounting representatives and the SEC. Initial Public Offering (IPO) - When a private company goes public for the first time. Inquiry - A procedure that consists of seeking information, both financial and non financial, of knowledgeable persons throughout the company. It is used extensively throughout the audit and often is complementary to performing other procedures. Inquiries may range from formal written inquiries to informal oral inquiries. Insolvent - When an entity's LIABILITIES exceed its ASSETS. Installment - Partial payment. Installment Method - Tax ACCOUNTING method of reporting GAIN on the sale of an ASSET exchanged for a RECEIVABLE. In general, the gain is reported as the note is paid off. Intangible Asset - Asset having no physical existence such as trademarks and patents. (See TANGIBLE ASSET.) Interest - Payment for the use or forbearance of money. Interim Financial Statements - FINANCIAL STATEMENTS that report the operations of an entity for less than one year. Internal Audit - AUDIT performed within an entity by its staff rather than an independent certified public accountant. Internal Control - Process designed to provide reasonable assurance regarding achievement of various management objectives such as the reliability of financial reports. Internal Control Over Financial Reporting - A process designed by, or under the supervision of the company's principal executive and principal financial officers or persons performing similar functions and effected by the company's board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
Internal Rate of Return - Method that determines the discount rate at which the present value of the future CASH FLOWS will exactly equal investment outlay. Internal Revenue Code - Collection of tax rules of the federal government. Also referred to as Title 26 of the United States Code. Internal Revenue Service (IRS) - Federal agency that administers the INTERNAL REVENUE CODE. The IRS is part of the United States Treasury Department. International Accounting Standards Committee, the (IASC) - is an independent private sector body, formed in 1973, with the objective of harmonizing the accounting principles which are used in businesses and other organizations for financial reporting around the world. Its members are 143 professional accounting bodies in 104 countries. Internet/World Wide Net - The Internet is the unregulate wild west show of computer networks connected together throughout the world. The World Wide Web or WWW, is part of the Internet. Inventory - Tangible property held for sale, or materials used in a production process to make a product. Investment - EXPENDITURE used to purchase goods or services that could produce a return to the investor. IPO - See INITIAL PUBLIC OFFERING. IRS - See INTERNAL REVENUE SERVICE. Issuer -
This term means an issuer, the securities of which are registered
under Section 12 of the Securities Exchange Act of 1934, or that
is required to file reports under Section 15(d) of that Act, or
that files or has filed a registration statement with the SEC that
has not yet become effective under the Securities Act of 1933 and
that it has not withdrawn. Joint Venture - When two or more persons or organizations gather CAPITAL to provide a product or service. Often carried out as a PARTNERSHIP. Journal - Any book containing original entries of daily financial transactions. Junk Bonds
- DEBT SECURITIES issued by companies with higher than normal
credit risk. Considered "non-investment grade" bonds, these SECURITIES
ordinarily yield a higher rate of interest to compensate for the
additional risk. Key Person Insurance - Business-owned life insurance contract typically on the lives of principal officers that normally provides for guaranteed death benefits to the company and the accumulation of a cash surrender value. Kiting
- 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. copyright: New York State Society of Certified Public Accountants website, www.nysscpa.org copyright: New York State Society of Certified Public Accountants website, www.nysscpa.org
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