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GLOSSARY OF TERMS

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  401(k):

A type of retirement program sponsored by employers for their workers. Contributions deducted directly from your paycheck make it easy to save and can reduce your taxable income for that year. Earnings grow quickly because they’re tax-deferred. Many employers also match the employee’s own contributions up to a set limit.

  Accountant

An individual trained and knowledgeable in the profession of accountancy.

  Accounting (Accountancy)

The function of compiling and providing financial information primarily by reports referred to as financial statements. Accounting includes bookkeeping, systems design, analysis and interpretation of accounting information.

  Accounts Payable

Obligations to pay for goods or services that have been acquired on open accounts from suppliers. Accounts Payable is a current liability in the Balance Sheet.

  Accounts Receivable

Amounts due the company on account from customers who have bought merchandise or received services. Accounts Receivable is a current asset in the Balance Sheet.

  Accrual Basis

The method of keeping accounts which shows all expenses incurred and income earned for a given period of time, even though such expenses and income may not actually have been paid or received in cash during the same period of time.

  Accrued Expense

An expense incurred, but not yet paid.

  Accrued Revenue

Revenue earned, but not yet collected.

  Accumulated Depreciation

An account to which estimated depreciation is added.

  Adjustable Rate Mortgage or ARM.

A mortgage with an interest rate that may increase or decrease during the term of the loan, according to determined margins with limits on increases or decreases (called "caps").

  Adjusted Entry

An entry made in the general journal at the end of an accounting period to bring certain accounts up to date.

  Agent

A person authorized by another to act on their behalf. Thus, an agent can enter into contacts and other such legal binding functions on behalf of another. Usually, the corporation’s officers act as corporate agents.

  Amortization

Accounting or financial process of reducing an amount by periodic payments or write-downs. Refers to liquidation, writing off or extinguishing of a debt over a period of time.

  Annual Meeting of Shareholders

Nearly all states require a corporation to hold an annual meeting of shareholders at which time directors are elected and other corporate issues are voted on.

  Annuity

a sequence of equal payments, usually made at regular intervals of time

  Annuities:

A tax-deferred product that mixes features of an investment and an insurance policy. There are generally two types- fixed annuities (pay a fixed rate of interest) or variable (your return is not guaranteed but you have freedom to choose how your money is invested). Among the advantages: unlike a 401(k) or IRA, there’s no dollar limit on how much you can invest. Among the disadvantages: annuities typically carry relatively high fees and penalties.

  Appreciation

Increase in value. Often used with reference to an asset, such as land, building, stocks or bonds.

  Articles of Incorporation (Certificate of incorporation or charter)

The articles are the primary legal document of a corporation; they serve as a corporation’s Constitution. The articles are filed with the state government to begin corporate existence. The articles contain basic information on the Corporation as required by state law.

  Articles of Organization

LLCs must file the articles with the proper state authorities to begin existence. The articles of organization are very similar to a corporation’s articles of incorporation.

  Asset

Anything of value owned or controlled by a corporation or individual. An asset may be tangible or intangible.

  Assumed Name

A name under which a corporation conducts business that is not the legal name of the corporation as shown in its articles of incorporation. If a corporation does business under an assumed name, it may be required to file registration of the assumed name with the state. Also known as a Fictitious Business Name.

  Authorized Shares or Stock

The total number of shares a corporation is authorized to sell. This number is specified in the articles of incorporation. All of the shares authorized need not be issued.

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