Accounting Glossary S-Z
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Accounting Terminology Guide S-Z 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 S Corporation - An S Corporation is a corporation which, under the Internal Revenue Code, is generally not subject to federal income taxes. Instead, taxable income of the corporation is passed through to its stockholders in a manner similar to that of a partnership. Safe Harbor Rule - 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. Sale-Leaseback Transaction - Sale of property by a seller who simultaneously leases the property back from the purchaser. Salvage Value - Selling price assigned to retired FIXED ASSETS or merchandise unsalable through usual channels. SAS - See STATEMENTS ON AUDITING STANDARDS. SEC - See SECURITIES AND EXCHANGE COMMISSION. SEC Filings - Financial and informational DISCLOSURES required by the SEC in order to comply with certain sections of the Securities Act of 1933 and the Securities and Exchange Act of 1934. Some of the more common filings that publicly owned companies must submit are the FORM 10-K, FORM 10-Q and FORM 8-K. SEC Registration Statement - DISCLOSURE document that must be filed with the SEC in connection with a public offering of SECURITIES, unless the offering is exempt. Securities and Exchange Commission (SEC) - Agency authorized by the United States Congress to regulate the financial reporting practices of most public corporations. Security - Any kind of transferable certificate of ownership including EQUITY SECURITIES and DEBT SECURITIES. Securitization -Source of financing whereby an entity's ASSETS (typically mortgage loans, lease obligations or other types of RECEIVABLES) are placed in a special purpose vehicle that issues SECURITIES collateralized by such assets. Security Interest - Legal interest of one person in the property of another to assure performance of a second person under a contract. Settlement Method - Method of ACCOUNTING for SECURITIES whereby transactions are recorded on the date the securities settle by the delivery or receipt of securities and the receipt or payment of cash. SFAS - See STATEMENT OF FINANCIAL ACCOUNTING STANDARDS. Short Sale - Sale of an item before it is purchased. 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. Short-Term - Current; ordinarily due within one year. Significant Accounts - An account is significant if there is more than a remote likelihood that the account could contain misstatements that individually or when aggregated with others, could have a material effect on the financial statements, considering the risks of both overstatement and understatement. Significant Deficiency - Acontrol deficiency or combination of control deficiencies, that adversely affects the company's ability to initiate, authorize, record, process or report external financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a misstatement of the company's annual or interim financial statements that is more than inconsequential will not be prevented or detected. Significant Findings or Issues - Substantive matters that are important to the procedures performed, evidence obtained, or conclusions reached and include but are not limited to:
Single Audit Act - The Single Audit Act of 1984 and the Single Audit Act Amendments of 1996 establish requirements for audits of states, local governments, and nonprofit organizations that administer federal financial assistance programs above a certain threshold. Sole Proprietorship - See PROPRIETORSHIP. Special Assessment - Charge made by a local government for the cost of an improvement or service. It is usually levied on those who will benefit from the service. Special Report - Special report is a term applied to auditors' reports issued in connection with various types of financial presentations, including: Financial statements that are prepared in conformity with a comprehensive basis of accounting other than generally accepted accounting principles. Specified elements, accounts or items of a financial statement. Compliance with aspects of contractual agreements or regulatory requirements related to audited financial statements. Financial presentations to comply with contractual agreements or regulatory provisions. Financial information presented in prescribed forms or schedules that require a prescribed form of auditor's reports. Spinoff - Transfer of all, or a portion of, a subsidiary's stock or other ASSETS to the stockholders of its parent company on a PRO RATA basis. Spot Market - Market for buying and selling commodities or financial instruments for immediate delivery and payment based on the settlement conventions of the particular market. Spread - Difference between two prices, usually a buying and selling price. SSARS - See STATEMENTS ON STANDARDS FOR ACCOUNTING AND REVIEW SERVICES. Start-up Costs - (1) Costs, excluding acquisition costs, incurred to bring a new unit into production. (2) Costs incurred to begin a business. Stated Value - Per share amount set by the BOARD OF DIRECTORS to be placed in the CAPITAL STOCK account upon issuance of NO-PAR VALUE. Statement of Cash Flows - A statement of cash flows is one of the basic financial statements that is required as part of a complete set of financial statements prepared in conformity with generally accepted accounting principles. It categorizes net cash provided or used during a period as operating, investing and financing activities, and reconciles beginning and ending cash and cash equivalents. Statement of Financial Accounting Standards (SFAS) - Statements issued by the FINANCIAL ACCOUNTING STANDARDS BOARD (FASB). Statement of Financial Condition - Basic FINANCIAL STATEMENT, usually accompanied by appropriate DISCLOSURES that describe the basis of ACCOUNTING used in its preparation and presentation as of a specified date, the entity's ASSETS, LIABILITIES and the EQUITY of its owners. Also known as BALANCE SHEET. Statements on Auditing Standards (SAS) - Statements issued by the Accounting Standards Board of the AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA). Statements on Standards for Accounting and Review Services (SSARS) - Statements issued by the AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA) that specifically relate to REVIEWS and COMPILATIONS. (See ACCOUNTANTS' REPORT.) Stock Compensation Plan - FRINGE BENEFIT that gives employees the option to purchase the employer's stock at a specified price during a specified period. Stock Option - Right to purchase or sell a specified number of shares of stock at specified prices and times. Stock Split - Increase in the number of shares of a company's COMMON STOCK outstanding that result from the issuance of additional shares proportionally to existing stockholders without additional capital investment. The PAR VALUE of each share is reduced proportionally. Straight-Line Depreciation - ACCOUNTING method that reflects an equal amount of wear and tear during each period of an ASSET'S useful life. For instance, the annual STRAIGHT-LINE DEPRECIATION of a $2,500 asset expected to last five years is $500. (See ACCELERATED DEPRECIATION.) Strike Price - Price of a financial instrument at which conversion or exercise occurs. Subsequent Event - Material event that occurs after the end of the accounting period and before the publication of an entity's FINANCIAL STATEMENTS. Such events are disclosed in the notes to the financial statements. (See MATERIALITY.) Swap
- Financial contract in which two parties agree to exchange net
streams of payments over a specified period. The payments are usually
determined by applying different indices (e.g., interest rates,
foreign exchange rates, equity indices) to a NOTIONAL amount. The
term notional is used because swap contracts generally do not involve
exchanges of PRINCIPAL. Tangible Asset - ASSETS having a physical existence, such as cash, land, buildings, machinery, or claims on property, investments or goods in process. (See INTANGIBLE ASSETS.) Tax - Charge levied by a governmental unit on income, consumption, wealth, or other basis. Tax Lien - ENCUMBRANCE placed on property as security for unpaid taxes. Tax Shelter - Arrangement in which allowable tax deductions or exclusions result in the deferral of tax on income that would otherwise be payable currently. Tenancy-in-Common - Co-ownership of property. In a valid tenancy-in-common, a deceased co-owner's title passes to his or her heirs without being included in the estate of the deceased co-owner. Term Loan - Loan for a specified time period. Timing of Tests of Control - The auditor must perform tests of controls over a period of time that is adequate to determine whether, as of the date specified in management's report, the controls necessary for achieving the objectives of the control criteria are operating effectively. Total Gain - Excess of the proceeds realized on the sale of either INVENTORY or noninventory goods. Trade Date - Date when a SECURITY transaction is entered into, to be settled on at a later date. Transactions involving financial instruments are generally accounted for on the trade date. Treasury Bill - Short-term obligation that bears no INTEREST and is sold at a discount. Treasury Bond - Long-term obligation that matures more than five years from issuance and bears INTEREST. Treasury Instruments - Direct financial obligations of the United States government. (See TREASURY BILL; TREASURY BOND; TREASURY NOTE; TREASURY STOCK.) Treasury Note - Intermediate-term obligation that matures one to five years from issuance and bears INTEREST. Treasury Stock - Stock reacquired by the issuing company. It may be held indefinitely, retired, issued upon exercise of STOCK OPTIONS or resold. Troubled Debt Restructuring - Agreement between DEBTOR and CREDITOR which amends the terms of a DEBT that has little chance of being paid in accordance with its contractual terms. The agreement may involve the transfer of ASSETS in full or partial satisfaction of the debt. Trust - Ancient legal practice where one person (the GRANTOR) transfers the legal title to an ASSET, called the principle or corpus, to another person (the TRUSTEE), with specific instructions about how the corpus is to be managed and disposed. Trustee -
Person who is given legal title to, and management authority over,
the property placed in a trust. Unaudited Financial Statements - FINANCIAL STATEMENTS which have not undergone a detailed AUDIT examination by an independent CERTIFIED PUBLIC ACCOUNTANT (CPA). Unearned Income - Payments received for services which have not yet been performed. Uniform Accountancy Act (UAA) - The UAA is the proposal for a new regulatory framework for the public accounting profession which was developed jointly by the American Institute of Certified Public Accountants (AICPA) and the National Association of State Boards of Accountancy (NASBA). The new framework is intended to enhance interstate reciprocity and practice across state lines by CPAs, meet the future needs of the profession, respond to the marketplace and protect the public that the profession serves. Unqualified Opinion - AUDIT opinion not qualified for any material scope restrictions nor departures from GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). The auditor may issue an unqualified opinion only when there are no identified material weaknesses and when there have been no restrictions on the scope of the auditor's work. Also known as CLEAN OPINION. Unrestricted Funds - Resources of a not-for-profit entity that have no restrictions as to use or purpose. (See FUND ACCOUNTING and RESTRICTED FUND.) Use of Professional
Skepticism when Evaluating the Results of Testing - The auditor
must conduct the audit of internal control over financial reporting
and the audit of the financial statements with professional skepticism,
which is an attitude that includes a questioning mind and a critical
assessment of audit evidence. Valuation Allowance - Method of lowering or raising an object's CURRENT VALUE by adjusting its acquisition cost to reflect its market value by use of a CONTRA ACCOUNT. Variable Rate Loan - Loan whose interest rate changes over its life in relation to the level of an index. Variance - Deviation or difference between an estimated value and the actual value. Venture Capital - Investment company whose primary objective is capital growth. New ASSETS invested largely in companies that are developing new ideas, products, or processes. Vesting
- Point at which certain benefits available to an employee are no
longer contingent on the employee continuing to work for the employer.
Walkthroughs - The most effective means for an auditor to confirm his understanding how internal control over financial reporting is designed and operates to evaluate and test its effectiveness. It includes making inquiries of and observing the personnel who actually perform the controls; reviewing documents that are used in, and that result from, the application of the controls; and comparing supporting documentation to the accounting records. In a walkthrough, the auditor traces a transaction from origination through the company's information systems to the point where it is reflected in the company's financial reports. Walkthroughs provide the auditor with evidence to:
Warrant - Option to purchase additional SECURITIES from the issuer. Wash Sale - Sale of SECURITIES in which seller has acquired substantially identical securities within a period beginning 30 days before and ending 30 days after the date of the sale. Withholding - Amount withheld or deducted from employee salaries by the employer and paid by the employer, for the employee, to the proper authority. Working Capital - Excess of CURRENT ASSETS over CURRENT LIABILITIES. Working Papers - (1) Records kept by the AUDITOR of the procedures applied, the tests performed, the information obtained, and the pertinent conclusions reached in the course of the AUDIT. (2) Any records developed by a CERTIFIED PUBLIC ACCOUNTANT (CPA) during an audit. Work in Progress - INVENTORY account consisting of partially completed goods awaiting completion and transfer to finished inventory. Wrap-Around
Mortgage - Second MORTGAGE which conveniently expands the total
amount of borrowing by the mortgagor without disturbing the original
mortgage. Yellow Book - Written by the GENERAL ACCOUNTING OFFICE, the yellow book sets forth standards to be followed in auditing the FINANCIAL STATEMENTS of entities that receive federal financial assistance. "Yellow Book" is the name given to "Government Auditing Standards" issued by the Comptroller General of the United States which contains standards for audits of government organizations, programs, activities and functions, and of government assistance received by contractors, nonprofit organizations and other nongovernment organizations. Yield - Return on an INVESTMENT an investor receives from DIVIDENDS or INTEREST expressed as a percentage of the cost of the SECURITY. Yield to
Maturity - Rate of return on a SECURITY to its maturity, giving
effect to the stated interest rate, accrual of discount, or AMORTIZATION
of PREMIUM. Zero-Coupon
Bond - BOND on which the holder receives only one payment at
maturity which includes both PRINCIPAL and INTEREST from issuance
to maturity. copyright: New York State Society of Certified Public Accountants website, www.nysscpa.org
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