Understanding Terminology
Account
Formal record that represents, in words, money or other unit of measurement, certain resources, claims to such resources, transactions or other events that result in changes to those resources and claims.
Account Payable
Amount owed to a creditor for delivered goods or completed services.
Account Receivable
Claim against a debtor for an uncollected amount, generally from a completed transaction of sales or services rendered.
Accountants’ Report
Formal document that communicates an independent accountant’s (1) expression of limited assurance on financial statements as a result of performing inquiry and analytic procedures (Review Report); (2) results of procedures performed (type of Attestation Report); (3) non-expression of opinion or any form of assurance on a presentation in the form of financial statements information that is the representation of management (Compilation Report); or (4) an opinion on an assertion made by management in accordance with the Statements on Standards for Attestation Engagements (Attestation Report). An accountant’s report does not result from the performance of an audit.
Accounting
Recording and reporting of financial transactions, including the origination of the transaction, its recognition, processing, and summarization in the financial statements.
Accounting and Review Services
Are official pronouncements covering compilation and review engagements. Compilation is presenting in the form of financial statements information that is the representation of management (owners) without expressing assurance. Review is inquiry and analytical procedures to provide the accountant a basis for expressing limited assurance that there are no material modifications that should be made to the statements for them to be in conformity with U.S. generally accepted accounting.
Accounting Change
Change in (1) an accounting principle; (2) an accounting estimate; or (3) the reporting entity that necessitates disclosure and explanation in published financial reports.
Accrual Basis
Method of accounting that recognizes revenue when earned, rather than when collected. Expenses are recognized when incurred rather than when paid.
Accrued Expense
An expense incurred during an accounting period for which payment is not due until a later accounting period. This results from the purchase of services which at the time of accounting have only been partly performed, are not yet billable, or have not been paid for.
Accumulated Depreciation
Total depreciation pertaining to an asset or group of assets from the time the assets were placed in services until the date of the financial statement or tax return. This total is the contra account to the related asset account.
Additional Paid in Capital
Amounts paid for stock in excess of its par value or stated value. Also, other amounts paid by stockholders and charged to equity accounts other than capital stock.
Adjusting Entries
Accounting entries made at the end of an accounting period to allocate items between accounting periods.
Agreed-Upon Procedures
An engagement where the client specifies procedures and the accountant agrees to perform those procedures. An accountant may accept an engagement to apply agreed-upon procedures to financial statement elements, where the scope of the engagement is not sufficient to express an opinion, if the users assume responsibility for sufficiency of the procedures, and use of the report is restricted to specified users.
Amortization
Gradual and periodic reduction of any amount, such as the periodic writedown of a bond premium, the cost of an intangible asset or periodic payment of mortgages or other debt.
Analytical Procedures
Substantive tests of financial information which examine relationships among data as a means of obtaining evidence. Such procedures include (1) comparison of financial information with information of comparable prior periods; (2) comparison of financial information with anticipated results (e.g., forecasts); (3) study of relationships between elements of financial information that should conform to predictable patterns based on the entity’s experience; and (4) comparison of financial information with industry norms.
Analyze
Identify and classify items for further study.
Annual Report
The annual report to shareholders is the principal document used by most public companies to disclose corporate information to their shareholders. It is usually a state-ofthe-company report, including an opening letter from the Chief Executive Officer, financial data, results of continuing operations, market segment information, new product plans, subsidiary activities, and research and development activities on future programs. The Form 10-K, which must be filed with the SEC, typically contains more detailed information about the company’s financial condition than the annual report.
Assertion
Explicit or implicit representations by an entity’s management that are embodied in financial statement components and for which the auditor obtains and evaluates evidential matter when forming his/her opinion on the entity’s financial statements.
Audit Risk
The risk that the auditor may unknowingly fail to modify appropriately his/her opinion on financial statements that are materially misstated.
Audit Sampling
Application of an audit procedure to less than 100% of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class.
Auditors’ Report Written communication issued by an independent certified public accountant (CPA) describing the character of his/her work and the degree of responsibility taken. An auditor’s report includes a statement that the audit was conducted in accordance with generally accepted auditing standards (GAAS), which require that the auditor plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, as well as a statement that the auditor believes the audit provides a reasonable basis for his/her opinion.
Bad Debt
All or portion of an account, loan, or note receivable considered to be uncollectible.
Balance Sheet
Basic financial statement, usually accompanied by appropriate disclosures that describe the basis of accounting used in its preparation and presentation of a specified date the entity’s assets, liabilities, and the equity of its owners. Also known as a statement of financial condition.
Bond
One type of long-term promissory note, frequently issued to the public as a security regulated under federal securities laws or state blue sky laws. Bonds can either be registered in the owner’s name or are issued as bearer instruments.
Book Value
Amount, net or contra account balances, that an asset or liability shows on the balance sheet of a company. Also known as carrying value.
Business Combinations
Combining of two entities. Under the purchase method of accounting, one entity is deemed to acquire another and there is a new basis of accounting for the assets and liabilities of the acquired company.
Business Segment — Any division of an organization authorized to operate, within prescribed or otherwise established limitations, under substantial control by its own management.
Capital Stock
Ownership shares of a corporation authorized by its articles of incorporation. The money value assigned to a corporation’s issued shares. The balance sheet account with the aggregate amount of the par value or stated value of all stock issued by a corporation.
Capitalized Cost
Expenditure identified with goods or services acquired and measured by the amount of cash paid or the market value of other property, capital stock, or services surrendered. Expenditures that are written off during two or more accounting periods.
Carrying Value
Amount, net or contra account balances, that an asset or liability shows on the balance sheet of a company. Also known as book value.
Cash Basis
An other comprehensive basis of accounting in which revenues and expenditures are recorded when they are received and paid.
Cash Equivalents
Short-term (generally less than three months), highly liquid investments that are convertible to known amounts of cash.
Cash Flows
Net of cash receipts and cash disbursements relating to a particular activity during a specified accounting period.
Casualty Loss
Sudden property loss caused by theft, accident, or natural causes.
Change in Engagement
A request, before the completion of the audit (review), to change the engagement to a review or compilation (compilation) of financial statements.
Class Actions
A federal securities class action is a court action filed on behalf of a group of shareholders under Rule 23 of the Federal Rules of Civil Procedure. Instead of each shareholder bringing an individual lawsuit, one or more shareholders bring a class action for the entire class of shareholders.
Common Stock
Capital stock having no preferences generally in terms of dividends, voting rights, or distributions.
Comparative Financial Statement
Financial statement presentation in which the current amounts and the corresponding amounts for previous periods or dates also are shown.
Compilation
Presentation in the form of financial statements information that is the representation of management (owners) without the accountant’s assurance as to conformity with generally accepted accounting principles (GAAP).
Comprehensive Basis of Accounting
A complete set of rules other than U.S. GAAP applied to all items in a set of financial statements. Examples include a basis of accounting required by a regulatory agency, a basis of accounting the entity uses for its income tax return and the cash receipts and disbursements basis.
Comprehensive Income
Change in equity of a business enterprise during a period from transactions and other events and circumstances from sources not shown in the income statement. The period includes all changes in equity except those resulting from investments by owners and distributions to owners.
Confirmation
Auditor’s receipt of a written or oral response from an independent third party verifying the accuracy of information requested.
Consolidated Financial Statements
Combined financial statements of a parent company and one or more of its subsidiaries as one economic unit.
Consolidation
Business combination of two or more entities that occurs when the entities transfer all of their net assets to a new entity created for that purpose.
Contingent Liability
Potential liability arising from a past transaction or a subsequent event.
Continuing Accountant
An accountant who has been engaged to audit, review, or compile and report on the financial statements of the current period and one or more consecutive periods immediately prior to the current period.
Control Risk
Measure of risk that errors exceeding a tolerable amount will not be prevented or detected by an entity’s internal controls.
Controls Tests
Tests directed toward the design or operation of an internal control structure policy or procedure to assess its effectiveness in preventing or detecting material misstatements in a financial report.
Current Asset
Asset that one can reasonably expect to convert into cash, sell, or consume in operations within a single operating cycle, or within a year if more than one cycle is completed each year.
Current Liability
Obligation whose liquidation is expected to require the use of existing resources classified as current assets, or the creation of other current liabilities.
Current Value
(1) Value of an asset at the present time as compared with the asset’s historical cost. (2) In finance, the amount determined by discounting the future revenue stream of an asset using compound interest principles.
Debt
General name for money, notes, bonds, goods, or services which represent amounts owed.
Definite Criteria
An other comprehensive basis of accounting using a definite set of criteria having substantial support that is applied to all material items appearing in financial statements, such as the price-level basis of accounting.
Depreciation
Expense allowance made for wear and tear on an asset over its estimated useful life.
Derivatives
Derivatives are financial instruments whose performance is derived, at least in part, from the performance of an underlying asset, security or index. For example, a stock option is a derivative because its value changes in relation to the price movement of the underlying stock.
Detection Risk
Risk that the auditor will not detect a material misstatement.
Disclosure
Process of divulging accounting information so that the content of financial statements is understood.
Discount
Reduction from the full amount of a price or debt.
Dividends
Distribution of earnings to owners of a corporation in cash, other assets of the corporation, or the corporation’s capital stock.
Earnings Per Share (EPS)
Measure of performance calculated by dividing the net earnings of a company by the average number of shares outstanding during a period.
Employee Stock Options Plans
Many companies use employee stock options plans to compensate, retain, and attract employees. These plans are contracts between a company and its employees that give employees the right to buy a specific number of the company’s shares at a fixed price within a certain period of time. Employees who are granted stock options hope to profit by exercising their options at a higher price than when they were granted.
Employee Stock Options Plans should not be confused with the term “ESOPs,” or Employee Stock Ownership Plans, which are retirement plans.
Employee Stock Ownership. Plans (ESOPs)
An employee stock ownership plan (ESOP) is a retirement plan in which the company contributes its stock to the plan for the benefit of the company’s employees. With an ESOP, you never buy or hold the stock directly. This type of plan should not be confused with employee stock options plans, which are not retirement plans. Instead, employee stock options plans give the employee the right to buy their company’s stock at a set price within a certain period of time.
Engagement Letter
A letter that represents the understanding about the engagement between the client and the CPA. The letter identifies the financial statements and describes the nature of procedures to be performed. It includes an explanation of the objectives of the procedures, an explanation that the financial information is the responsibility of the company’s management, and a description of the form of report.
Equity
Residual interest in the assets of an entity that remains after deducting its liabilities. Also, the amount of a business’ total assets, less total liabilities. Also, the third section of a balance sheet, the other two being assets and liabilities.
Equity Securities
Capital stock and other securities that represent ownership shares, or the legal rights to purchase or acquire capital stock.
Error
Act that departs from what should be done; imprudent deviation, unintentional mistake or omission.
Fair Market Value
Price at which property would change hands between a buyer and a seller without any compulsion to buy or sell,
Federal Securities Laws
The laws that govern the securities industry, include the Securities Act of 1933; Securities Exchange Act of 1934; Investment Company .Act of 1940; Investment Advisers Act of 1940; and Public Utility Holding Company Act of 1935.
Financial Forecasts
Are prospective financial statements that present expected future financial position, results of operations, and cash flows based on expected conditions. A financial forecast is of the most likely future scenario.
Financial Projections
Are prospective financial statements that present, given one or more hypothetical assumptions, an entity’s expected financial position, results of operations, and changes in financial position. A financial projection includes several alternative scenarios while a forecast is the single most likely scenario.
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.
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.
Form 10-K
This is the report that most publicly traded companies file with the SEC on an annual basis. It provides a comprehensive overview of the company’s business and financial condition. Some companies choose to send their Form 10-K to their shareholders instead of sending a separate annual report. Currently, Form 10-K must be filed with the SEC within 90 days after the end of the company’s fiscal year.
Form 10-Q
The Form 10-Q is a report filed quarterly by most reporting companies. It includes unaudited financial statements and provides a continuing view of the company’s financial position during the year. The report must be filed for each of the first three fiscal quarters of the company’s fiscal year and is currently due within 45 days of the close of the quarter. In addition to Form 10-Q, companies provide annual reports to their shareholders and file Form 10-K on an annual basis with the SEC.
Fraud
Willful misrepresentation by one person of a fact inflicting damage on another person.
Gain
Excess of revenues received over costs relating to a specific transaction.
General Ledger
Collection of all asset, liability, owners equity, revenue, and expense accounts.
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 is 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/her audit and in the actual report.
Going Concern
Assumption that a business can remain in operation long enough for all of its current plans to be carried out.
Going Private
A company “goes private” when it reduces the number of its shareholders to fewer than 300 and is no longer required to file reports 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.
Gross Income
A tax term meaning all income from whatever source derived, except as otherwise provided in the income tax code.
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.
Hedges
Protect an entity against the risk of adverse price or interest-rate movements on its assets, liabilities, or anticipated transactions. A hedge is used to avoid or reduce risks by creating a relationship by which losses on positions are counterbalanced by gains on separate positions in another market.
Historical cost
Original cost of an asset to an entity.
Income
Inflow of revenue during a period of time.
Income Statement
Summary of the effect of revenues and expenses over a period of time.
Income Tax Basis
An other comprehensive basis of accounting that the reporting entity uses
or expects to use to file its income tax return for the period covered by the financial statements.
Initial Public Offerings (IPO) TO stands for initial public offering and occurs when a company first sells its shares to the public.
Inquire (Inquiry)
Ask questions of client personnel.
Insider Trading
“Insider trading” actually includes both legal and illegal conduct. The legal version is when corporate insiders — officers, directors, and employees — buy and sell stock in their own companies. Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include “tipping” such information, securities trading by the person “tipped,” and securities trading by those who misappropriate such information.
Intangible Asset
Asset having no physical existence such as trademarks and patents. 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 Control
Process designed to provide reasonable assurance regarding achievement of various management objectives such as the reliability of financial reports.
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.
Journal
Any book containing original entries of daily financial transactions.
Last in, First out (LIFO) — Accounting method of valuing inventory under which the costs of the last goods acquired are the first costs charged to expense. Commonly known as LIFO.
Lease
Conveyance of land, buildings, equipment, or other assets from one person (Lessor) to another (Lessee) for a specific period of time for monetary or other consideration, usually in the form of rent.
Leasehold
Property interest a lessee owns in the leased property.
Ledger
Any book of accounts containing the summaries of debit and credit entries.
Lessee
Person or entity that has the right to use property under the terms of a lease.
Lessor
Owner of property, the temporary use of which is transferred to another (lessee) under the terms of a lease.
Liability
Debts or obligations owed by one entity (Debtor) to another entity (Creditor) payable in money, goods, or services.
Long-Term Debt
Debt with a maturity of more than one year from the current date.
Loss
Excess of expenditures over revenue for a period or activity. Also, for tax purposes, an excess of basis over the amount realized in a transaction.
Lower of Cost or Market
Valuing assets for financial reporting purposes. Ordinarily, “cost” is the purchase price of the asset and “market” refers to its current replacement cost. Generally accepted accounting principles (GAAP) requires that certain assets (e.g., inventories) be carried at the lower of cost or market.
Management Representation Letter
A letter addressed to the auditor, signed by the client’s chief executive office and chief financial officer. During an audit, management makes many representations to the auditor. Written representations from management in the letter confirm oral representations given to the auditor, document the continuing appropriateness of such representations, and reduce the possibility of misunderstanding.
Management Use Only
Term used when compiled financial statements are not expected to be used by a third party.
Marketable Securities
Stocks and other negotiable instruments which can be easily bought and sold on either listed exchanges or over-the-counter markets.
Mark-to-Market
Method of valuing assets that results in adjustment of an asset’s carrying amount to its market value.
Matching Principle
The concept that all costs and expenses incurred in generating revenues must be recognized in the same reporting period as the related revenues.
Materiality
Magnitude of an omission or misstatements of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would change or be influenced.
Mergers
Mergers are business transactions involving the combination of two or more companies into a single entity. Most state laws require that mergers be approved by at least a majority of the company’s shareholders if the merger will have a significant impact on the company.
Modified Cash Basis
An other comprehensive basis of accounting that begins with the cash basis method (see Cash. Basis) and applies modifications having substantial support, such as recording depreciation on fixed assets or accruing income taxes.
Nasdaq
Nasdaq stands for the National Association of Securities Dealers Automated Quotation System. Unlike the New York Stock Exchange where trades take place on an exchange, Nasdaq is an electronic stock market that uses a computerized system to provide brokers and dealers with price quotes. The National Association of Securities Dealers, Inc. owns and operates The Nasdaq Stock Market.
Net Assets
Excess of the value of securities owned, cash, receivables, and other assets over the liabilities of the company.
Net Income
Excess or deficit of total revenues and gains compared with total expenses and losses for an accounting period.
Net Sales
Sales at gross invoice amounts less any adjustments for returns, allowances, or discounts taken.
Net Worth
Similar to equity, the excess of assets over liabilities.
Nonpublic Entity
Any entity other than (a) one whose securities trade in a public market either on a stock exchange (domestic or foreign) or in the over-the-counter market, including securities quoted only locally or regionally; (b) one that makes a filing with a regulatory agency in preparation for the sale of any class of its securities in a public market; or (c) a subsidiary, corporate joint venture, or other entity controlled by an entity covered by (a) or (b).
No-Par Stock
Stock authorized to be issued but for which no par value is set in the articles of incorporation. A stated value is set by the board of directors on the issuance of this type of stock.
No-Par Value
Stock or bond that does not have a specific value indicated.
Objectivity
Emphasizing or expressing the nature of reality as it is apart from personal reflection or feelings; independence of mind.
Other Comprehensive Basis of Accounting (OCBOA)
Consistent accounting basis other than generally accepted accounting principles (GAAP) used for financial reporting. Examples include an income tax basis or a cash basis.
Paid in Capital
Portion of the stockholders’ equity which was paid in by the stockholders, as opposed to capital arising from profitable operations.
Par Value
Amount per share set in the articles of incorporation of a corporation to be entered in the capital stocks account where it is left permanently and signifies a cushion of equity capital for the protection of creditors.
Parent Company
Company that has a controlling interest in the common stock of another.
Predecessor Accountant
An accountant who (a) has reported on the most recent compiled or reviewed financial statements or was engaged to perform but did not complete a compilation or review of the financial statements, and (b) has resigned, declined to stand for reappointment, or been notified that his or her services have been or may be terminated.
Preferred Stock
Type of capital stock that carries certain preferences over common stock, such as a prior claim on dividends and assets.
Premium
(1) Excess amount paid for a bond over its face amount. (2) In insurance, the cost of specified coverage for a designated period of time.
Prepaid Expense
Cost incurred to acquire economically useful goods or services that are expected to be consumed in the revenue-earning process within the operating cycle.
Prescribed Form
Any standard preprinted form designed or adopted by the body to which it is to be submitted, for example, forms used by industry trade associations, credit agencies, banks, and governmental and regulatory bodies other than those concerned with the sale or trading of securities. A form designed or adopted by the entity whose financial statements are to be compiled is not considered to be a prescribed form.
Present Value
Current value of a given future cash flow stream, discounted at a given rate.
Principal
Face amount of a security, exclusive of any premium or interest. The basis for interest computations.
Ratio Analysis
Comparison of actual or projected data for a particular company to other data for that company or industry in order to analyze trends or relationships.
Real Property
Land and improvements, including buildings and personal property that is permanently attached to the land or customarily transferred with the land.
Receivables
Amounts of money due from customers or other debtors.
Reconciliation
Comparison of two numbers to demonstrate the basis for the difference between them.
Reissued Report
A report issued subsequent to the date of the original report that bears the same date as the original report. A reissued report may need to be revised for the effects of specific events; in these circumstances, the report should be dual-dated with the original date and a separate date that applies to the effects of such events.
Related Party Transaction
Business or other transaction between persons who do not have an arm’s-length relationship (e.g., a relationship with independent, competing interests). The most common is between family members or controlled entities. For tax purposes, these types of transactions are generally subject to a greater level of scrutiny.
Research and Development (R&D)
Research is a planned activity aimed at discovery of new knowledge with the hope of developing new or improved products and services. Development is the translation of research findings into a plan or design of new or improved products and services.
Retained Earnings
Accumulated undistributed earnings of a company retained for future needs or for future distribution to its owners.
Revenue Recognition
Method of determining whether or not income has met the conditions of being earned and realized or is realizable.
Revenues
Sales of products, merchandise, and services; and earnings from interest, dividend, rents.
Review
Accounting service that provides some assurance as to the reliability of financial information. In a review, a certified public accountant (CPA) does not conduct an examination under generally accepted auditing standards (GAAS). Instead, the accountant performs inquiry and analytical procedures that provide the accountant with a reasonable basis for expressing limited assurance that there are no material modifications that should be made to the statements for them to be in conformity with GAAP or, if applicable, with an other comprehensive basis of accounting (OCBOA).
Risk Management
Process of identifying and monitoring business risks in a manner that offers a risk/return relationship that is acceptable to an entity’s operating philosophy.
Security
Any kind of transferable certificate of ownership including equity securities and debt securities.
Short-Term
Current; ordinarily due within one year.
SSARS
Statements on Standards for Accounting And Review Services issued by the AICPA Accounting and Review Services Committee (ARSC).
Start-up Costs
(1) Costs, excluding acquisition costs, incurred to bring a new unit into production. (2) Costs incurred to begin a business.
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 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.
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 $10,000 asset expected to last ten years is $1,000.
Strike Price
Price of a financial instrument at which conversion or exercise occurs.
Submission of Financial Statements
Presenting to a client or third party’s financial statements that the accountant has prepared either manually or through the use of computer software.
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.
Successor Accountant
An accountant who has been invited to make a proposal for an engagement to compile or review financial statements and is considering accepting the engagement or an accountant who has accepted such an engagement.
Tangible Asset
Assets having a physical existence, such as cash, land, buildings, machinery, or claims on property, investments or goods in process.
Tax
Charge levied by a governmental unit on income, consumption, wealth, or other basis.
Third Party
All parties except for members of management who are knowledgeable about the nature of the procedures applied and the basis of accounting and assumptions used in the preparation of the financial statements.
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 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.
Trend Analysis
An analysis of the change in something over time. Analytical procedures, which compare financial statement ratios of different years, are an example of trend analysis.
Trial Balance
A trial balance consists of a listing of all of the general ledger accounts and their corresponding debit or credit balances. Also, in a trial balance, no attempt is made to establish a mathematical relationship among the assets, liabilities, equity, revenues, and expenses except that total debits equal total credits.
Unearned Income — Payments received for services which have not yet been performed.
Updated Report
A report issued by a continuing accountant that takes into consideration information that he/she becomes aware of during his/her current engagement and that re-expresses his/her previous conclusions or, depending on the circumstances, expresses different conclusions on the financial statements of a prior period as of the date of his/her current report.
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.
Variance
Deviation or difference between an estimated value and the actual value.
Work in Progress
Inventory account consisting of partially completed goods awaiting completion and transfer to finished inventory.
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.
Yield
Return on an investment an investor receives from dividends or interest expressed as a percentage of the cost of the security.
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