Tower Accounting

ACCOUNTING SERVICES

At Tower Accounting, we focus on building close client relationships that add long-term value. This includes assuring the solidity of financial records, evaluating financial procedures and working to produce strategies that help our clients face the myriad challenges of business planning and execution. Our clients benefit from objective analysis to assist in controlling costs, increasing efficiency, and implementing new technologies and procedures that take advantage of changes in the marketplace, accounting standards, and tax law. Our assurance services will improve information quality or its context, meaning more success for your business.

These services include but are not limited to:

· Audits, reviews, and compilations

· Entity selection and restructuring

· Accounting software selection, implementation, and support

· Business valuations

· Financial projections and forecasts

· Debt and finances advising

· Business succession

ESTATE AND TRUST PLANNING AND TAX PREPARATION

Effective estate and trust planning can ensure financial security for loved ones. For businesses, it can maintain a smooth succession of ownership. Tower Accounting's role is to help you navigate the complex and shifting tax laws to facilitate the transfer of assets and minimize the tax liability of your beneficiaries. Everyone should have a well-thought-out plan as to how to distribute the assets left in one's estate so as to avoid complications and to be sure that the individual’s wishes are followed. Having your taxes and estate thoroughly and carefully planned will ensure that your loved ones don't have any complications to deal with during a time of loss.

QUICKBOOKS ACCOUNTING HELP AND ASSISTANCE

QuickBooks can provide useful and timely information in the form of financial statements, reports and graphs. However, it can only provide this information if you purchase the right product and then install, setup and use it properly. We don't just help you use the software, we help you use it more efficiently and more effectively.

Tower Accounting offers the following solutions to help meet your QuickBooks needs:

Personal Training

We train you personally! Either one-on-one or several individuals within your organization at your company's location.

Installation

We install QuickBooks on your stand alone computer or in a network environment, in either single- or multi-user mode.

Setup

We assist new QuickBooks users with initial setup including: EasyStep Interview, Preferences, Lists, Customers, Vendors, Employees, Banking and Reports. We also help experienced users manage their businesses more effectively by improving their current setup. Many users experience problems and lack the ability to generate and track important information as a result of inadequate setup.

Support

Our QuickBooks support service can assist you with any installation, setup or operation assistance you might need. In addition, our support is not limited just to the software part of it, but we can also provide accounting and payroll assistance.

Review

Our QuickBooks review service helps companies that have the human resources to perform daily accounting and payroll tasks, but need an accounting and payroll expert to review your transactions, accounts and reports. This review ensures that you receive timely, relevant and reliable financial information. We also inform you of any corrections, adjustments or reclassifications necessary to ensure that the financial information you receive reflects the correct financial condition of your business. Reviews may be conducted at any time, but monthly reviews provide you with up-to-date information and feedback about your business.

BOOKKEEPING/WRITE-UP

Accurate record-keeping is essential to a successful business yet can also be complicated and time consuming. Tower Accounting can help you with the organization and day-to-day tasks of bookkeeping so that you can focus on your core business.

IRS REPRESENTATION

Professional representation can be vital during an audit, and our experience with tax authorities enables us to guide clients in their dealings with federal and state agencies. If you have been chosen for an audit, the professional representation you can find with our firm can put many of your worries at bay. We are ready and willing to answer any and all questions the IRS may be asking of you.

CASH FLOW AND BUDGETING ANALYSIS

Good cash management can improve a company's liquidity, reduce costs, and increase profitability. Tower Accounting can help you maintain optimal cash flow levels by tracking sources and uses, forecasting, and budgeting accordingly. To a business entity, cash flow is something that can make or break the business' ability to survive. We can help you analyze your spending, re-balance your budget and/or debts for an optimal cash flow to support your business' success. This balance plan would be revisited if and when there were any major changes in your business structure to ensure that you are operating at an optimal level. With our help and guidance, you will always be on top of your finances and ready for the future.

TAX MANAGEMENT SERVICES

At Tower Accounting, we guide our clients through a full range of tax planning and preparation decisions with strategies that minimize your tax liabilities, maximize your cash flow and keep you on track to your financial goals. Our expertise, experience, analysis and thorough research allow us to optimize financial opportunities to be found in existing as well as recently altered tax laws. We are knowledgeable and up to date on the tax laws and can make sense of your receipts, bills and notices.

Request information about Tax Management Services below

ACCOUNTING SERVICES

From start-ups to established enterprises, businesses rely on accurate and insightful financial information in order to maintain profitability and capitalize on new opportunities. Tower Accounting's accounting services steer you closer to these goals with accurate record-keeping and reporting as well as support on financial issues such as initial accounting system setup, cost-containment, tax planning, investments, and employee benefit and profit-sharing plans.

These services include but are not limited to:

· General ledger and financial statement preparation

· Bookkeeping (Monthly, quarterly, or annual)

· Accounting system setup and support

· Payroll processing

· Cash flow budgeting and forecasting

· Personal financial statements

· Employee benefit and profit-sharing plans

· Corporate tax planning and return preparation

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401(k)

A retirement account to which an eligible employee can   contribute a certain amount of his or her pretax salary; earnings are   tax-deferred. Some employers may match a stated percentage of employee 401(k)   contributions. The reduced cost and liability of 401(k) plans appeal to   employers.

403(b)

A qualified retirement plan similar to the 401(k),   available to employees of nonprofit and government organizations.

Account Balance

The net of credits and debits for an account at the end of   a reporting period.

Account Reconciliation

The process of ensuring that the beginning balance plus   the sum of all entries on an account statement equals the ending balance.   After deposits, interest received, and credits are added and automatic   withdrawals, outstanding checks, negotiated checks, and account charges are   subtracted, if the resulting balance equals the ending balance on the   statement, the account is reconciled.

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.

Active-Participant Status

A person who participates in a qualified pension, stock   bonus, or profit-sharing plan, a qualified annuity plan, a tax-sheltered   annuity (TSA) plan, a simplified employee pension plan, or a local, state,   county, or federal retirement plan has active-participant status, as does his   or her spouse.

Actuary

A person who analyzes probability and risk estimates for   insurance contracts and retirement plans.

Adjustable Rate Mortgage (ARM)

A mortgage with an interest rate that changes periodically   based on a measure or an index, such as the rate on US Treasury bills or the   average national mortgage rate. Borrowers assume a degree of risk in order to   receive a lower rate at the beginning of an ARM.

Adjusted Entry

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

Adjusted Gross Income (AGI)

The amount of income subject to federal income taxes. To   determine AGI, subtract deductions (e.g., business expenses or IRA   contributions) from gross income (employment income, interest income,   dividends, and capital gains).

Advance

Money received from an employer before it is actually   earned.

Agent

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

Aggressive Growth Fund

A mutual fund designed to maximize long-term capital   growth, rather than dividend income, by investing in narrow market segments,   small company stocks, and companies with high growth rates.

Allocation Formula

The formula that governs employer contributions to   employee profit-sharing plans and redistributes funds forfeited by employees   who leave these plans.

Alternative Minimum Tax (AMT)

A tax calculation designed to prevent taxpayers from   escaping their fair share of tax liability by taking numerous tax breaks; it   adds certain tax preference items back into adjusted gross income. If AMT liability   is greater than regular tax liability, the taxpayer must pay the AMT amount.

American Opportunity Tax Credit (Hope   Credit)

A federal tax credit that compensates families for a   certain amount of tuition per student per year for the first four years of   post-secondary education.

Amortization

A way of measuring the consumption of the value of   long-term assets like equipment or buildings. This process gradually   eliminates a debt, loan, or mortgage over a period of time. It can also be   used to deduct capital expenses 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.

Annual Percentage Rate (APR)

The yearly cost of credit or a loan, expressed as a simple   percentage. All consumer credit agreements and loans are legally required to   disclose the APR.

Annual Report

A yearly statement that describes company management,   operations, and financial information. The Securities and Exchange Commission   (SEC) requires all corporations issuing registered stock to publish annual   reports, which are sent to shareholders and also made available for public   review.

Annuitant

The person to whom an annuity is payable.

Annuity

A long-term contract sold by life insurance companies that   guarantees fixed or variable payments to the purchaser at regular intervals.   Payments are usually scheduled to begin at a future time, such as retirement.   Some annuities provide tax-deferred earnings, often as part of retirement   plans.

Annuity Cash Refund

The contract for an annuity offering income for life may   include a death benefit for the total premiums paid. When the annuitant dies,   the annuity cash refund will be the net sum of premiums paid minus the amount   received in annuity payments.

Annuity Certain

An option in an annuity contract that allows the annuity   owner to select a future level of income covering a specified number of   years, generally 10 years. If the annuitant dies before the end of this   period, the remaining obligation is transferred to a designated beneficiary.

Annuity Joint Life

An annuity option for two or more individuals where   payments cease at the death of the first annuitant.

Annuity Joint and Survivor

An annuity option that provides payments for two   designated annuitants. Upon the death of the first annuitant, the surviving   annuitant receives prearranged, continued payments for life, based on a   percentage received by the first annuitant.

Annuity Modified Refund

In a contributory retirement plan, the annuity beneficiary   of a deceased retiree receives the accumulated balance of the pension fund,   which is referred to as the annuity modified refund.

Annuity Payout Option

The choice of how payments from an annuity will be   received: as a fixed dollar amount, for a fixed period, or over the   lifetime(s) of one or two annuitants.

Application Fee

A fee to process a loan application.

Appraisal

An assessment of a property's value by a qualified   appraiser, based on information from recent sales of similar properties.

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.

Asset Allocation

A process that divides investments among different asset   classes, such as stocks, bonds, and cash, in order to reduce portfolio risk.

Asset Class

A specific category of assets or investments, such as   cash, bonds, stocks, or real estate. Assets in the same class have similar   characteristics and behave similarly in the marketplace.

Assignment

The legal transfer of ownership of an asset to another   person or entity.

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.

Automatic Reinvestment

Automatically depositing mutual fund dividends or capital   gains back into an account to buy additional shares.

Bad Debts

Accounts receivable that are uncollectible used in accrual   method accounting.

Balance

Amount arrived at by adding all debits and subtracting all   credits to ensure total debits equal the total credits.

Balance Sheet

Statement, at a particular point in time, of the financial   position of a business or organization. This is generally divided into three   parts: assets, liabilities and ownership, or equity. Also known as Statement   of Financial Position.

Balloon Mortgage

A type of mortgage with a final payment that is   considerably larger than the preceding payments, typically used when   borrowers anticipate receiving a large sum of cash to pay the balance or when   they expect to refinance before the final payment.

Bank Overdraft

Balance of a bank account when funds withdrawn exceed   funds deposited.

Bank Reconciliation

Analysis that accounts for the difference between the   balance shown on the bank statement and the balance shown in the accounting   records on a given date.

Bankrupt

Legal status of a person/corporation who/which is unable   to pay its debts as they become due and who/which has made a transfer of   property or of a right or interest in property to a trustee for the benefit   of creditors.

Bankruptcy

The state of being insolvent or unable to pay outstanding   debt. Declaring bankruptcy is expensive, and it can have adverse effects on   one's credit in the future. These are some common ways to apply for   bankruptcy:

Basis

The total original cost (including any additional outlays)   of an equity investment or a piece of property. This is used by the Internal   Revenue Service to compute taxable gain, profit, or appreciation.

Basis Point

A measurement of variation in financial instruments, equal   to .01%. For example, a yield that has increased from 8.97% to 9% has   increased by 3 basis points.

Bear Market

An extended period during which market prices decline. The   opposite of a bull market.

Beneficiary

The person or entity named in a will, life insurance   policy, qualified retirement plan, or annuity who will receive benefits upon   the death of the insured or the plan participant.

Benefits Received

When people pay taxes according to the amount of   government aid (benefits) they receive. Examples of benefits the American   public receives include (to name only a few): welfare, child care, Medicare   and Medicaid. Some people believe it is only fair that people pay taxes based   on the amount of government aid they receive.

Beta

A measure of a security's price volatility relative to an   appropriate market index. For example, the S&P 500 index is considered to   have a beta of 1; stocks with betas greater than 1 experience more price   fluctuations than that index, while the prices of stocks with betas less than   1 fluctuate less often.

Bill of Lading

Written document issued by the carrier of goods. Also, a   receipt for goods and a contract to deliver goods.

Blue-Chip Stock

The common stock of a company with a reputation for   quality and a long history of earnings growth and dividend payments, such as   General Electric, IBM, or DuPont.

Bond

A debt security issued by a corporation, government, or   governmental agency that obligates the issuer to pay interest at   predetermined intervals and repay the principal at maturity. A bond's face   value is the amount of money the holder will receive when the bond matures.   The face value does not change, but the bond's market value may fluctuate   before maturity.

Book Value

(1) The current value of a fixed asset as shown by the   records; the difference between the original cost of the asset and the   accumulated depreciation. (2) The difference between the accounts receivable   and the allowance for bad debts. (3) The value of a share of stock as shown   by the corporate books.

Book of Original Entry

A journal in which transactions are recorded for the first   time before summarizing or posting to ledger accounts. For example, purchase   journals, cash receipts journals, accounts payable journals, disbursements   journals, general journals and payroll journals are all books of original   entry. See General Journal and Journal.

Bookkeeping

The recording of financial transactions electronically or   manually. The record-keeping part of the accounting process.

Broker

A financial professional who facilitates the trading of   services or property such as securities, real estate, insurance, or   commodities.

Budget

A report of projected income and expenses for a given   period.

Bull Market

An extended period of rising security prices in financial   markets. The opposite of a bear market.

Business Succession

A plan for the future transfer of a business entity,   involving legal, financial, tax, and family concerns.

Business Taxes

A government levy on income for businesses.

Buy-Sell Agreement

A contract that provides for the purchase of all   outstanding shares from a business owner. Generally, such contracts allow for   a different ownership structure in the future.

Buy-and-Hold

An investment strategy that advocates holding securities   for the long term and ignoring short-term price fluctuations.

Bylaws

Bylaws are the rules and regulations adopted by a   corporation for its internal governance. It usually contains provisions   relating to shareholders, directors, officers and general corporate business.   At the corporation's initial meeting the bylaws are adopted. Bylaws are a   private document not filed with any state authority. Bylaws are more flexible   than the articles of incorporation because they are easier to amend.

CAPS

A limit on how much the interest rate can change either at   each adjustment or during the life of the mortgage, e.g., "2/6"   equates to 2% per year and 6% over life of loan.

Cafeteria Employee Benefit Plan

A plan offering a variety of benefit options from which   employees may choose, such as health insurance, life insurance, and   retirement benefits.

Canceled Check

A check that has cleared the bank and is returned to the   depositor with his monthly statement.

Capital (or Equity)

Interest of the owner in the business that is the   difference between Assets & Liabilities. Also called Equity or Net worth.   In a corporation, capital represents the stockholders' equity.

Capital Asset

Assets, of either a tangible or intangible nature, owned   or held by a business which are expected to be used or held over several   fiscal periods.

Capital Gain / Loss

Profit or gain realized from the sale or exchange of a   capital asset. The amount is determined by calculating the difference between   an asset's purchase and sale price.

Capital Gains Distribution

A payment to shareholders of profits realized on the sale   of an investment company's securities.

Capital Gains Tax

A tax on profits from the sale of securities or other   assets.

Capital Loss

A decrease in the value of an investment or capital asset   from its purchase price.

Capital Stock

See Stock and Authorized stock.

Cash Advance

An instant loan against a line of credit. Interest is   usually charged on cash advances from the date the advance is made until it   is repaid. Issuers may also charge transaction fees.

Cash Basis

An accounting method that counts cash inflows or outflows   when they are actually expended or received (as opposed to accrual basis).

Cash Budget

A budget used to quantify an immediate short-term cash   flow.

Cash Flow

The aggregate of all cash inflows and outflows. This can   be expressed as positive or negative cash flow.

Cash Management

The process of channeling cash into expenditures that   enhance productivity.

Cash Surrender Value

The amount the policy-owner receives when voluntarily   terminating a cash value life insurance or annuity contract before its   maturity or before the insured event occurs.

Casualty Loss

Sudden and unexpected losses due to damage, destruction,   fire or theft, for which one can be compensated by insurance contracts.

Certificate of Authority

A document issued by the proper state authority to a   foreign corporation granting the corporation the right to do business in that   state.

Certificate of Deposit (CD)

An agreement with a commercial bank in which funds are   deposited at a fixed interest rate for a specified period of time. CDs are   insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.   There may be a penalty if funds are withdrawn before the CD reaches maturity.

Certified Public Accountant (CPA)

A professional accountant who has received certification   to practice accounting from a state board of examination and may also be a   member of the American Institute of Certified Public Accountants or other   various state CPA organizations.

Chapter 11

A debtor (business, individual, or partnership) is   declared bankrupt but is allowed reorganization to attempt debt repayment.   Creditor approval is required. A separate taxable entity is created.

Chapter 13

A debtor (individual or sole proprietor) is declared bankrupt   but is allowed to retain estate related assets and restructure debt   obligations for eventual payment. No creditor approval is required.

Chapter 7

A debtor (individual) is declared bankrupt, and a   court-appointed trustee initiates a liquidation process and a discharge of   all eligible debts. The debtor has no financial sources to attempt a   reorganization. A separate taxable entity is created.

Check

A written, signed, and dated instrument that allows for   the transfer of money from a bank account to a payee.

Check Register

A form of cash payments journal which is used to record   deposits and expenditures in and out of a bank account.

Claim

A request for payment from an insurance policy.

Claims-Paying-Ability Rating

An assessment of an insurance company's ability to pay   claims.

Close Corporation or Closely Held   Corporation

A close corporation is a corporation that possesses the   following traits: a small number of shareholders, no ready market for the   corporation's stock and substantial participation by the majority   shareholders in the management of the corporation. Some states have close   corporation statutes.

Closing

The end of a trading session or the process of   transferring real estate from a seller to a buyer.

Closing Costs

Costs involved in transferring real estate from a seller   to a buyer, over and above the price of the property. These can include   charges for loan origination, discount points, appraisal, property survey,   title search, title insurance, deed filing, credit reports, taxes, and legal   services. Closing costs do not include points or the cost of private mortgage   insurance (PMI).

Cloud on Title

A claim, lien, or right on real estate that requires a   quitclaim deed to resolve the potential hindrance before the title can be   transferred.

Combined Financial Statement

A side-by-side accounting of balance and net worth   statements for several affiliated business enterprises.

Commercial Loan

A loan intended for short-term financing of a business,   based on the creditworthiness of the business or owner and the prime lending   rate.

Commercial Paper

An unsecured, short-term debt instrument used by   corporations with high-quality debt ratings to fund short-term liabilities.   Generally considered a safe investment.

Commission

The fee charged by an agent or broker for facilitating a   transaction.

Commitment

A written agreement specifying the terms and conditions of   a mortgage.

Common Stock

A security that represents partial ownership or equity in   a corporation. Holders of common stock are entitled to participate in the   company's stockholder meetings and vote for the board of directors.

Compound Interest

Interest calculated on both the principal amount invested   and the previously accumulated unpaid interest.

Compounding

A process in which income and gains on an investment are   reinvested to grow further. When you earn compound interest, you earn   interest on both the principal amount and the accumulated interest as it is   earned.

Consignee

A person who receives goods that belong to someone else   for future sale or other purpose. Although consignees are not the owners of   the goods, they are accountable for them.

Consignment

Goods that are in the hands of someone other than the   owner for future sale or other purpose.

Consignor

The owner of goods that are in another person's hands for   future sale or other purpose.

Consolidated Financial Statements

Financial statements that show the results of all   operations under the parent company's control, including those of any   subsidiaries.

Construction Loan Note

A short-term obligation used to fund a construction   project. In most cases, the issuers, such as a city government, will repay   the note obligation by issuing a long-term bond.

Contingent Beneficiary

A secondary beneficiary who receives insurance benefits if   the primary beneficiary revokes his or her status, is ineligible, or is   deceased.

Contingent Liability

An obligation to pay if certain future events occur. This   can also refer to a defined obligation for which the chances of payment are   minimal.

Controlling Interest

Direct or indirect ownership of voting shares sufficient   to elect the majority of the board of directors of a corporation.

Convertible Term Insurance

An insurance policy that allows the policyholder to   convert the face amount of coverage in term insurance to an identical amount   of whole life insurance.

Corporate Bond

A debt security issued by a corporation that obligates the   issuer to pay interest periodically and repay the principal at maturity.   Corporate bonds often have higher interest rates than government bonds due to   possible default risk.

Corporate Record Book

Maintaining the proper records is very important to assure   limited liability to corporate shareholders. The corporation should have a   record book that contains a copy of the articles of incorporation, bylaws,   initial and subsequent minutes of directors and shareholders meetings and a   stock register.

Corporation

A group of people acting jointly for business and tax   purposes who are able to incur debt and realize profit without immediate   legal or taxable liabilities. A corporate entity allows its owners to attract   outside capital by selling shares of ownership, protects the owners from   liability beyond their investment outlay, provides for continuity of   operations beyond the lives of the current owners and allows changes in   ownership through the transfer of shares.

Correction

A reverse movement in the price of a stock, bond,   commodity, or index that brings it more in line with its underlying   fundamental value.

Cosigner

An individual who signs a loan or credit card agreement   along with the principal applicant and assumes responsibility for the   outstanding balance if the applicant defaults.

Covenant not to Compete

A clause in a contract that obligates one party to refrain   from performing professional or business activities similar to those of the   other party.

Coverdell Education Savings Account   (Coverdell ESA)

A federal program that allows parents to accumulate tax-free   savings for a child's college education, formerly called the Education IRA.

Credit (1)

Legal obligation to make repayment at a later date for   goods, services or money obtained through the extension of credit, or a   promise to pay in the future. The cost of credit is usually referred to as a   finance charge, interest or time-price differential

Credit (2)

Entry recording an increase to a liability or owner's   equity or revenue, or a reduction to an asset or expense. Credits are   recorded in the right hand column of an account or a two-column book.   Opposite of debit.

Credit Bureau

Clearinghouse of consumer credit information used by   businesses to determine the credit

Credit History

A record of how a party has paid past debts.

Credit Line

A revolving agreement that allows a person to borrow any   amount up to a preapproved limit for purchases or cash advances. When the   outstanding balance is paid off, credit again becomes available to fund new   purchases or cash advances.

Credit Note

Issued by a seller to a purchaser to record the reduction   of a bill because of an allowance, return or cancellation. Opposite of an   invoice.

Credit Rating

A formal assessment of an individual's or a corporation's   ability to handle credit, based on the history of borrowing and repayment, as   well as the availability of assets and the extent of liabilities.

Credits

If you have a store credit, you can use the credit to   purchase merchandise free of charge. If you have a tax credit, your taxes are   reduced by the amount of your credit. You can get tax credits for purposes   such as child care expenses and the earned income credit for low-income   taxpayers.

Cumulative Voting

Cumulative voting allows shareholders to aggregate their   votes in favor of fewer candidates than there are slots available. This   method of voting is intended to create adequate representation for minority   shareholders.

Current Asset

Unrestricted cash, or any other asset that is expected to   be converted into cash or consumed in the production of income within a year.

Current Liability

Liability expected to be liquidated in a year.

Debit

An entry recording an increase to an asset or expense or a   reduction to a liability, revenue or owner's equity. Debits are recorded in   the left-hand column of an account or a two-column book. Opposite of credit.

Debit Card

A card issued by a bank that can be used to withdraw cash   from an automated teller machine or to make purchases at merchant locations.   Debit cards deduct funds from the checking or savings account linked to the   card when they are used.

Debt

A legal obligation to deliver a product, service or amount   of money.

Debt-to-Equity Ratio

The ratio that indicates a company's ability to repay   outstanding creditors. This also indicates the degree of leveraged money to   improve the rate of return for shareholders.

Decreasing Term Insurance

A term insurance policy with a death benefit that   decreases over time. This type of insurance is often used in conjunction with   a mortgage or other amortized debt to guarantee payment if the holder dies   before it is paid off.

Deed

A document that identifies legal ownership of real estate.

Deferred Annuity

An annuity that pays an income or lump sum at a future   date.

Deficit

A negative amount of retained earnings caused by   cumulative losses and dividend distributions exceeding cumulative net income.

Defined Benefit Plan

An employer funded and controlled retirement plan that   pays a predetermined benefit based on an employee's years of service and   salary or wages.

Defined Contribution Plan

A retirement plan to which an employer contributes a fixed   amount or percentage of the employee's salary each year. The employee may be   allowed to make individual contributions or choose the investment mix for his   or her account.

Deflation

The opposite of inflation. A reduction in the price of   goods and services. Possible causes of deflation are a decrease in the supply   of money or credit or reduced individual or government spending.

Demand Loan

A loan repayable upon the demand of a creditor.

Dependent

A person who relies on another for financial support.   Taxpayers who support dependents can claim tax exemptions for them.

Depletion

Gradual using up or consumption of a natural resource.

Deposit

Funds used as collateral for the delivery of a good, such   as a security deposit. It can also refer to the transfer of funds to another   party for safekeeping, such as a deposit into a bank account.

Depreciation

The decrease in value of a fixed asset during its   projected life expectancy, or the decrease in value of one currency in   relation to another.

Derivative

A financial instrument whose characteristics and value   depend on the value of an underlying instrument or asset, such as a   commodity, bond, equity or currency. Futures and options are types of   derivatives.

Direct Cost

Costs identified with a specific unit of product. For   example, clay in the production of flowerpots or tubing in the production of   bicycles are direct costs.

Direct Deposit

The transfer of funds refund directly to a bank account.

Direct Rollover

The tax-free transfer of money or property from one   retirement plan or account to another.

Direct Tax

A direct tax cannot be shifted to others, unlike an   indirect tax. For example, federal income tax is a direct tax. You are   required by law to pay.

Directors

Directors are elected by the shareholders. They manage or   direct the affairs of the corporation. Typically, the directors make only   major business decisions and monitor the activities of the officers.

Disability-Income Insurance

A policy that provides an income if total disability   prevents the insured from working.

Discount Broker

A broker who buys and sells securities at lower rates than   a full-service broker, and who may offer fewer services.

Disposable Income

An individual's income after taxes.

Dissolution

The termination of a corporation's legal existence.   Dissolution may be caused in a variety of ways including: failure to file   annual reports, failure to pay certain taxes, bankruptcy or voluntary   dissolution of the corporation by the shareholders and directors.

Diversification

An investment strategy that spreads investment risk over a   number of industries, market sectors or companies. Gains in one area can   offset losses in another.

Dividend

A distribution of earnings to a shareholder or mutual life   insurance policy owner. This distribution is usually in the form of money or   stock.

Dollar Cost Averaging

A strategy that invests a fixed dollar amount in   securities at set intervals, regardless of market prices. With this approach,   an investor buys more shares when prices are low and fewer shares when prices   are high, usually resulting in a lower average cost per share.

Domestic Corporation

A corporation is domestic in the state where it was   incorporated.

Double Taxation

The result of tax laws that cause the same earnings to be   taxed twice. For example, C corporations are taxed at the corporate level,   and their shareholders also pay taxes on the dividends they receive.

Dow Jones Industrial Average (DJIA)

The price-weighted average of 30 actively traded blue-chip   stocks on the New York Stock Exchange (NYSE). The DJIA represents 15-20% of   the market value of NYSE stocks.

Early Withdrawal

The removal of funds from a fixed-rate investment before   the maturity date or from a tax-deferred investment account before a   predetermined time.

Earned Income

The sum of income pertaining to wages, salaries, tips,   self-employed net earnings and any other income received for personal   services.

Earned Income Credit

A refundable tax credit low-income workers can file for,   even if no income tax was withheld from the worker's pay.

Electronic Banking

Computerized network services that allow bank account   holders to securely access their accounts on the internet.

Electronic Commerce (E-Commerce)

The use of the internet to conduct business and buy or   sell goods and services.

Electronic Filing (IRS e-file)

IRS e-file options allow you to file federal income tax   returns, and some state returns, through a tax professional, through your   home computer or even through your telephone. It may also be available in   many other places in your local community.

Electronic Funds Transfer System (EFTS)

A process by which funds are electronically transferred   between accounts. EFTS allows for direct deposits or withdrawals without   processing written checks.

Employee Retirement Income Security Act   (ERISA)

A 1974 law establishing government oversight and federal   limitations for pension and retirement plans.

Employee Stock Ownership Plan (ESOP)

An employer-sponsored program that encourages employees to   purchase shares in the company they work for and possibly participate in   management.

Endowment

Assets, funds or property donated to an individual,   organization or group to be used as a source of income.

Engagement Letter

Written communication between an accountant and a client   with respect to a professional engagement, outlining the scope of the   accountant's responsibilities and arrangements agreed upon.

Enrolled Agent

A federally-authorized tax practitioner who has technical   expertise in the field of taxation and who is empowered by the U.S.   Department of the Treasury to represent taxpayers before all administrative   levels of the Internal Revenue Service for audits, collections, and appeals.

Equity

Anything that represents ownership interests, such as   stock in a company. Equity can also refer to the difference between an   asset's current market value and the debt against it.

Equity Loan

A loan that allows a homeowner to borrow against the   accumulated equity in his or her home.

Escrow

A third-party agent, or account, that assumes possession   of a contract, a deed or money from a grantor until all outstanding   obligations or commitments are complete. Upon completion of these   obligations, the property held in escrow is delivered to the grantee.

Estate

Real and personal property owned by a person at the time   of death. Real property is land and anything permanently attached to it.

Estate Planning

The process of determining the disposition of a person's   assets after death.

Estate Taxes

Federal or state taxes levied on the assets of a person   who dies, paid by the decedent's estate rather than by the heirs.

Excess Compensation

The amount above the specified amount upon which   calculations for future benefits are based in a pension plan integrated with   federal old-age, survivors' and disability insurance (OASDI).

Excise Tax

Excise taxes are taxes on the sale or use of certain   products or transactions.

Executor

The person who is named in a will to administer the   distribution of the deceased's assets.

Exempt (from tax liability)

Before a taxpayer pays taxes, he or she can claim a set   amount of tax deductions for him or herself, a spouse and eligible dependents.   The total amount is subtracted from the adjusted gross income before the tax   on the remaining income is figured out.

Exempt (from withholding)

A taxpayer can be exempt from paying a certain amount of   federal income tax if they meet certain income, tax liability and dependency   requirements.

Expenditure

Consumption of an asset or payment for an expense.

External Auditor

An independent accountant engaged to determine if the   financial statements of an entity represent the economic events that occurred   during the period audited. The external audit is for the shareholders and   owners, rather than for management.

F.O.B.

Shipping term meaning "free on board" to inform   the purchasers of the location at which they become responsible for the   shipping charges. For example, F.O.B. Toronto means the vendor pays the   charges to Toronto's freight yard and the purchaser is responsible from   there.

FICA (Federal Insurance Contributions Act)

The Federal Insurance Contributions Act (FICA) consists of   both a Social Security payroll tax and a Medicare tax. The tax is levied on   employers, employees and certain self-employed individuals.

FORM 1040EZ

A simplified form to be used in place of the 1040 form for   some individuals.

FORM W-2

By January 31 of each year, your employer, even if you do   not work there anymore, will provide you with a statement of how much you   earned in wages, tips and other compensation from the previous year. This   form will reflect state and federal taxes, social security, Medicare wages   and tips withheld. It also includes a lot of other really important   information you will need to file your return.

FORM W-4 (Employee's withholding allowance   certificate)

Form W-4 is used to determine how much of an employee's   paycheck is withheld for federal income taxes.

Fair Market Value

The highest price available in an open and unrestricted   market between informed, prudent parties, acting at arm's length and under no   compulsion to transact. Fair market value is expressed in terms of money, or   money's worth.

Family Limited Partnership (FLP)

A partnership of family members that helps arrange for   generational transfers of wealth or a business, maintain control within the   general partners and reduce potential liability to the transferor and   transferee.

Federal Reserve System (The Fed)

The board of governors that oversee the Federal Reserve   Banks, establishes monetary policy, such as interest rates or credit, and   monitors the economic health of the country. Its members are appointed by the   President, subject to Senate confirmation and serve 14-year terms.

Federal Tax Identification Number

A number given to a corporation or other business entity   by the federal government for tax purposes. Banks generally require a tax   identification number to open bank accounts.

Fiduciary

An individual who provides investment advice for a fee,   who exercises discretionary authority in managing assets or who is   responsible for holding assets in trust and investing them for the benefit of   another party.

File A Return

To file a return is to send in your completed tax forms.   All your tax information appears on the return, including income and tax   liability.

Filing Status

Your filing status determines your tax bracket and amount   of taxes you must pay. Factors such as marital status affect your filing   status.

Financial Aid

Financial support that a student receives to attend   school, including loans, grants, scholarships and work-study programs.

Financial Statements

Formal financial reports prepared from accounting records.   For example, Profit & Loss Statement, Balance Sheet or Statement of   Retained Earnings are all types of financial statements.

First-to-Die Life Insurance

A life insurance policy covering two or more people that   pays a death benefit when the first person dies.

Fiscal Year

A period of one year for which financial statements are   prepared that may, or may not, coincide with the calendar year. Any   twelve-month period used by a business as its accounting period.

Fixed Annuity

An investment contract sold by a life insurance company   that guarantees regular payments to the purchaser for life or a specified   period of time, in exchange for a premium paid either in a lump sum or in   installments.

Fixed Assets

See Capital Assets

Fixed Rate

A mortgage with an interest rate which does not increase   or decrease during the term of the loan.

Fixed-Rate Mortgage

A mortgage with a set interest rate that remains the same   over the life of the loan.

Floating Debt

The constant renewal of government Treasury bills, or   short-term corporate bonds, to pay off current liabilities, or finance cash   flow.

Flood Insurance

Insurance against flood damage, usually required by   mortgage lenders if a property is located in a flood zone.

For Sale By Owner (FSBO)

When a homeowner sells his or her home directly to another   party, without the assistance of an agent, or broker.

Foreclosure

The legal procedure by which a mortgage holder can seize   the property of a borrower who has not made required payments.

Foreign Corporation

A corporation is referred to as a foreign corporation in   all states except for the state where it is incorporated. If a corporation   conducts business in a state other than where it was incorporated, it must   register for a certificate of authority to transact business in the other   state or possibly lose access to that state's courts and face fines.

Forfeitures

Non-vested employer contributions from the accounts of   employees who leave an employer's pension plan. These may be applied as   credits to remaining employee accounts or used to offset future employer   contributions.

Formal Tax Legislation Process

There are strict steps, that involve the President and   Congress, that a proposed tax must pass through before it becomes a law.

Franchise

A license that allows a designee to sell and market a   company's products or services in a fixed geographic area.

Franchise Tax

A tax imposed by the state for the privilege of carrying   on business as a corporation or LLC. The value of the franchise tax may be   measured by amount of earnings, total value of capital or stock or by amount   of business done.

Fringe Benefits

Opportunities and services offered beyond wages, or   salary, in compensation for employment. Common fringe benefits include paid   holidays, sick days, paid vacation days, insurance coverage or retirement   plans.

Front-End Load

A sales fee, or load, that is paid up front by investors   when they purchase an investment and deducted from the investment amount. A   front-end load generally lowers the size of the investment.

Futures

Agreements to buy or sell a specific amount of a commodity   or financial instrument at a set price on a specific future date.

GAAP

Abbreviation for generally accepted accounting principles.   GAAP, by definition, have been given formal recognition, or authoritative   support.

GAAS

Abbreviation for generally accepted auditing standards.   GAAS, by definition, have been given formal recognition, or authoritative   support.

General Journal

Journal in which transactions are recorded for which   specific journals are not provided. For example: adjustments and corrections.   In a small operation the general journal may be the only book of original   entry.

General Ledger

All the financial accounts and statements of a business,   including debits, credits and balances.

General Partner

An authorized agent of a partnership and of all other   partners for all purposes within the scope and objectives of a business.

Gift

A voluntary transfer of assets, or property, with no   compensation.

Gift Tax

A tax levied on assets transferred from one person to   another. This tax is paid by the donor.

Golden Boot

The offering of financial incentives or benefits to   persuade an older employee to retire early.

Golden Handcuffs

Benefits given to a valued employee to persuade him or her   to remain with the company.

Golden Parachute

A benefits package given to top executives who are laid   off due to a corporate buyout, or takeover.

Goodwill

The difference between going-concern value and tangible   asset value. Tangible assets include identifiable intangible assets with   values that can be separately determined.

Government Bond

A debt security issued by the U.S. government: two common   types are savings bonds and marketable securities.

Grace Period

A period of time after the due date of a payment during   which the overdue payment may be made without penalty, or lapse, in contractual   obligations.

Gross Estate

The total dollar value of a person's assets at the time of   death, before taxes and other debts.

Gross Income

Gross income is the total of all receipts and gains minus   the inventory cost of the business in a given time period. For example,   people who use the barter system are required to include whatever they've   bartered for as part of their gross income.

Gross Monthly Income

Total monthly income from all sources before taxes and   other expenses.

Group Life Insurance

A life insurance policy that insures a group of people.   This type of policy is often provided as an employee benefit.

Guardian

An individual who has legal responsibility for a minor   child, or a legally incapacitated adult.

Health Savings Account (HSA)

An account that offers individuals covered by   high-deductible health plans (HDHPs) tax-favored opportunities to save for   medical expenses.

Highly Compensated Employee (HCE)

For benefit plan purposes, an employee who receives   compensation in the top 20% of all employees, is a 5% owner of the business,   and exceeds certain annual compensation levels.

Holding Compan