Comprehensive Definitions Flashcards
Asset
-Something of value
*An asset is a resource with economic value than an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit
Liability
An obligation between one part and another not yet completed or paid for
Equity
The ownership of a public company or an asset
Shareholders equity
Equity, typically referred to as shareholders’ equity (or owners’ equity for privately held companies), represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debt was paid off in the case of liquidation. In the case of acquisition, it is the value of company sales minus any liabilities owed by the company not transferred with the sale.
Stockholders equity = total assets - total liabilities
What is the difference between equity and shareholders equity?
Equity typically refers to the ownership of a public company, and shareholders equity is the net amount of a company’s total; assets and total liabilities, listed on the balance sheet
Financial capital
Financial capital is the monetary assets required for a business to provide goods and services. Economic capital is commonly calculated through risk management strategies and determines the capital required to cushion a business from losses.
Revenue
Revenue is the money generated from normal business operations, calculated as the average sales price times the number of units sold. It is the top line (or gross income) figure from which costs are subtracted to determine net income. Revenue is also known as sales on the income statement.
Gross profit
Revenue less COGS
Taxable income
Taxable income is the portion of your gross income used to calculate how much tax you owe in a given tax year. It can be described broadly as adjusted gross income (AGI) minus allowable itemized or standard deductions. Taxable income includes wages, salaries, bonuses, and tips, as well as investment income and various types of unearned income.
Aka gross income minus allowable deductions
Adjusted gross income
Adjusted Gross Income or AGI is the starting point for what the IRS uses to determine your income tax liability. First you take your gross income, which is income from whatever source derived, and then you subtract certain adjustments, which are also know as above the line deductions. THese adjustments are expenses paid for with income that the IRS deems non-taxable. This results in your AGI.
Formal: Adjusted gross income (AGI) is the figure that the Internal Revenue Service (IRS) uses to determine your income tax liability for the year. It is calculated by subtracting certain adjustments from gross income, such as business expenses, student loan interest payments, and other expenses. After calculating a taxpayer’s AGI, the next step is to subtract deductions to determine their taxable income.
Gross income
All income from whatever source derived
Standard deduction
The term standard deduction refers to the portion of income not subject to tax that can be used to reduce your tax bill. The Internal Revenue Service (IRS) allows you to take the standard deduction if you do not itemize your deductions using Schedule A of Form 1040 to calculate taxable income. The amount of your standard deduction is based on your filing status, your age, and whether you are disabled or claimed as a dependent on someone else’s tax return.
Fair market value
Fair market value (FMV) is the price a product would sell for on the open market assuming that both buyer and seller are reasonably knowledgeable about the asset, are behaving in their own best interests, are free of undue pressure, and are given a reasonable time period for completing the transact
Net present value (NPV)
Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time
Capitalize a cost
To capitalize is to record a cost or expense on the balance sheet for the purposes of delaying full recognition of the expense. In general, capitalizing expenses is beneficial as companies acquiring new assets with long-term lifespans can amortize or depreciate the costs. This process is known as capitalization.
Capitalization is an accounting method in which a cost is included in the value of an asset and expensed over the useful life of that asset, rather than being expensed in the period the cost was originally incurred
Depreciation
the using up of an asset
Accounting depreciation is the process of allocating the cost of an asset over the course of its useful life so as to align its expenses with revenue generation
Net income
Net income is synonymous with a company’s profit for the accounting period. In other words, net income includes all of the costs and expenses that a company incurs, which are subtracted from revenue. Net income is often called “the bottom line” due to its positioning at the bottom of the income statement.
Although many items can be listed on a company’s income statement, depending on the company’s industry, usually net income is derived by subtracting the following expenses from revenue:
Operating expenses
Interest on debt and loans
Overhead or selling, general, and administrative expense (SG&A)
Income taxes
Depreciation, which is the allocation of the costs of fixed assets, such as equipment, over their useful life or life expectancy
Additional income sources are also included in net income. For example, companies often invest their cash in short-term investments, which is considered a form of income. Also, proceeds from the sale of assets are considered income.
Deduction
The formal deduction is “an amount allowable by Congress,” but in practicality a deduction is an amount that you have subtract from your gross income, which will then lower your taxable income.
Formal:A tax deduction is an amount that you can deduct from your taxable income to lower the amount of taxes that you owe. You can choose the standard deduction—a single deduction of a fixed amount—or itemize deductions on Schedule A of your income tax return.
Net cash flow
The difference between cash inflows and outflows over a specific period of time
Cash receipts
When money is collected from an external source and recorded as an increase to the cash account
Dividend
A payment in cash or stock that public companies distribute to their shareholders
Net operating income
Revenue less operating expenses
It is a calculation used to analyze the profitability of income generating real estate investments, and is a before tax figure
Operating expenses
An expense that a business incurs through its normal business operations.
Includes: rent, equipment, inventory costs, marketing, payroll, insurance, step costs, and R&D costs.
Amortization
An accounting technique used to periodically lower the book value of a loan or an intangible asset over a period of time.
Book value
The value of an asset according to its balance sheet account balance
Profit
Profit simply means revenue that remains after expenses, and corporate accountants calculate profit at a number of levels.
Operating profit
total earnings from its core business functions for a given period, excluding the deduction of interest and taxes. It also excludes any profits earned from ancillary investments, such as earnings from other businesses that a company has a part interest in. An operating loss occurs when core business income ends up being lower than expenses.
Nexus
Apportionment
Apportionment vs allocation
Dividends Received Deduction
Revenue vs sales
Gross receipts
Sales
Taxable sales
Exemptions vs exclusions vs credits
Credit (tax)
Types of federal tax
Types of state tax
Types of local tax
Additional paid-in capital
Accounts Receivable
Accounts payable
Accruals
Adjusting entries
Fair value
Treasury stock
Accumulated Comprehensive Income
Resale Exemption
Retail definition
Sole proprietorship
Individual Tax Return form
S-Corp
C-Corp
Corporation
Partnership
Capital Asset
Capital Gain
Bonus Depreciation
Section 179
Operating Expenses
Operating Assets
Carrying value
Book value
Net Book value
Par value stock
Common stock
Above the line deductions
Below the line deductions
Materiality
Qualified opinion
Unqualified opinion
LIFO
FIFO
COGS
Gross profit
Deferred Tax Liability
Deferred Tax Asset
Net assets
Net operating loss
Capital
Common individual deductions
Stock Options
Retained earnings
Self-employment tax
Basis
Adjusted basis
Gain
Other Comprehensive Income
Dividends
Interest
Dividends vs interest
Exemptions
Exclusions
Deduction
Net operating profit after tax
Net sales
Excise tax
Corporate Income Tax
Business Tax
Franchise tax
Gross Profit Margin
Closely held corporation
Use tax
Sales tax
Qualified business income
Ordinary dividends
Qualified dividends
Wholly-owned corporation
Cash flow
Debits vs credits
Fixed cost
GAAP
Liquidity
Inventory
Present value
Trial balance
Variable cost
401(k) Plan
IRA
Abatement
Accelerated depreciation
Acid-Ratio Test
Acquistion
Subsidiary
Adverse opinion
AICPA
Allowance for doubtful accounts
Alternative Minimum Tax
Annual Report
Assertion
Asset turnover
Authorized shares
Average cost-method
Backup withholding
Withholding
Bad debt
Beta coefficient
Bond
Bond discount
What are securities
Boot
Capital Asset Pricing Model (CAPM)
Capital expenditure
Ordinary Income
Capital stock
Carryover
Cash equivalents
statement of cash flows
marketable securities
Cash ratio
CDs
Casuality loss
Clean opinion
Comprehensive income
Consolidated financial statements
Consolidations
Contingent liability
Continuing operations
Discontinued operations
Contra account
Contributed capital
Contributed capital vs additional paid-in capital
Contribution margin
Control deficiency
COSO Framework
Conversion
Goodwill
Coporate bond
cost accounting
cost basis
Cost recovery method
Coupon
Jurisdiction
Coupon bond
Current asset
Current liability
current ratio
current yield
Double-declining balance
Debenture
Debt
Debt Instrument
Debt security
Debt-to-equity ratio
Annuity
qualified expenses
Depletion
Derivatives
Audit risk
Direct labor costs
Direct materials
Direct overhead
Disbursement
Disclaimer of opinion
Discount bond
Discount rate
Discount yield
Discounted cash flow
Trust
Estate
Dissolution
Distribution
Dividend payout ratio
Dividends in arrears
Historical cost
Dividends payable
Double taxation
Earned Income Tax Credit (EITC)
Earnings per share (EPS)
Earnings Price Ratio
Effective tax rate
Effective Interest Rate
Types of equity accounts
Equity Securities
Estate tax
Book value net assets
Estimated tax
Exempt organizations (examples?)
Tax exempt organizations include some schools, government (local, state, and federal), some churches, charities, advocacy groups, etc. They are designated under 501(c) of the IRC and exempt these organizations from paying federal income tax.
The reason for this tax break is that the government wants to encourage these entities that are for the benefit of all of society.
Foreign Income Tax Credit
Expenditure
Expense ratio
Extraordinary Items
Face value
Factoring
Fiduciary
Solvency
Liquidity vs solvency
Fixed annuity
Fixed costs
FOB
FOB Shipping Point
Form 10-K
Form 10-Q
Form W-4
Form W-2
Freight In
Freight Out
Future Value
Present value
General partnership
Going concern
Going private
Going public
IPO
Gross Sales
Gross Margin
Held-to-maturity security
Available for sale security
Income
Income Tax Basis
Index
Indirect manufacturing costs
Indirect method
Insolvency
Internal control
Internal Control over Financial Reporting (ICFR)
Discount rate
Mutual fund
Internal rate of return
Valuation
Inventory turnover
Investment income
Passive investments
Investment tax credit
Junk bonds
Lease
Limited Liability Company
Limited Liability Partnership
Limited Partnership
Liquid Assets
Liquidation
Liquidity Ratio
Long-term capital asset
Current portion long-term debt
Long-term gain
Lower of cost or market
Long-term loss
Margin
Margin of profit
Marginal tax rate
Modified AGI
Section 1231/1245/1250
SEP
Depreciation Recapture
Loss Carryback
Loss carryforward
Wash sales
P.L. 86-272
Payroll taxes
Employment taxes
What is the difference between payroll taxes and employment taxes?
Self-employment taxes
