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Qualified Opinion - AUDIT opinion that states, except for the effect of a matter to which a qualification relates, the FINANCIAL STATEMENTS are fairly presented in accordance with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). The AUDITOR is required to qualify when there is a scope limitation.
Quasi-Reorganization - Type of reorganization in which, with shareholder approval, the management revalues ASSETS and eliminates the DEFICIT (increased by asset devaluations if any) by charging it to other EQUITY accounts without the creation of a new corporate entity or without court intervention.
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Paid in Capital - Portion of the stockholders" EQUITY which was paid in by the stockholders, as opposed to CAPITAL arising from profitable operations.
Parent Company - Company that has a controlling interest in the COMMON STOCK of another.
Partnership - Relationship between two or more persons based on a written, oral, or implied agreement whereby they agree to carry on a trade or business for profit and share the resulting profits. Unlike a CORPORATION"S shareholders, the partnership"s general partners are liable for the DEBTS of the partnership. (See GENERAL PARTNERSHIP, LIMITED LIABILITY PARTNERSHIP, LIMITED PARTNERSHIP.)
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.
Passive Activity Loss - LOSS generated from activities involved in the conduct of a trade or business in which the taxpayer does not materially participate.
Passive Income - Includes income derived from such sources as dividends, interest, royalties, rents, amounts received from personal service contracts, and income received as a beneficiary of an estate or trust.
Patronage Dividends - These dividends are amounts paid by a cooperative to its members and customers based on the quantity or value of business conducted with or for the members during the tax year.
PCAOB - Public Corporation Accounting Oversight Board, a private-sector, non-profit corporation, created by the Sarbanes-Oxley Act of 2002, to oversee the AUDITORs of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports.
Peer Review - Process by which an accounting firm"s practice is evaluated for compliance with professional standards. The ive is achieved through the performance of an independent review by one"s peers.
Penalty - The various government codes contain numerous provisions which impose penalties on a taxpayer (any type of taxpayer) for failure to perform a specific act or omitting vital information on a return.
Pension - Retirement plan offered by an employer for the benefit of an employee, usually at retirement, through a TRUSTEE who controls the plan ASSETS. (See EMPLOYEE BENEFIT PLAN.)
Perpetual Inventory - System that requires a continuous record of all receipts and withdrawals of each item of INVENTORY.
Personal Financial Planning - Process for arriving at a comprehensive plan to solve an individual"s personal, business, and financial problems and concerns.
Personal Financial Specialist (PFS) - CERTIFIED PUBLIC ACCOUNTANT who specializes in PERSONAL FINANCIAL PLANNING and completes a series of requirements that include education, experience, ethics and an exam.
Personal Financial Statements - FINANCIAL STATEMENTS prepared for an individual or family to show financial status.
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ivity - Emphasizing or expressing the nature of reality as it is apart from personal reflection or feelings; independence of mind.
Obligations - Any amount which may require payment by an entity at a future time.
OCBOA - See OTHER COMPREHENSIVE BASIS OF ACCOUNTING.
OPEB - See OTHER POST-RETIREMENT EMPLOYEE BENEFIT.
Open-End Mutual Fund - MUTUAL FUND that does not have a fixed number of shares outstanding, offers new shares to the public, and buys back outstanding shares at market value.
Operating Agreement - Agreement, usually a written document, that sets out the rules by which a LIMITED LIABILITY COMPANY (LLC) is to be operated. It is the LLC equivalent of corporate BYLAWS or a PARTNERSHIP agreement.
Operating Cycle - Period of time between the acquisition of goods and services involved in the manufacturing process and the final cash realization resulting from sales and subsequent collections.
Option - Right to buy or sell something at a specified price during a specified time period.
Ordinary Income - One of two classes of income (the other being CAPITAL GAINS) taxed under the INTERNAL REVENUE CODE. Historically, ordinary income is taxed at a higher rate than capital gains.
Organization Expenditures - The costs of organizing a trade or business or for profit activity before it begins active business. A taxpayer may elect to amortize such expenses for a tern no less than 60 months. If the election is not made then the expenses are not deductible and may only be recovered when the business ceases operation or is sold.
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.
Other Post-Retirement Employee Benefit (OPEB) - All post-retirement benefits other than pensions, provided by employers to employees.
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NASBA - See NATIONAL ASSOCIATION OF STATE BOARDS OF ACCOUNTANCY.
National Association of State Boards of Accountancy - serves as a forum for the 54 State Boards of Accountancy, which administer the uniform CPA examination, license Certified Public Accountants and regulate the practice of public accountancy in the
Negative Assurance - Report issued by an ACCOUNTANT based on limited procedures that states that nothing has come to the accountant"s attention to indicate that the financial information is not fairly presented.
Negligence - The omission to do something which a reasonable man, guided by those ordinary considerations which ordinarily regulate human affairs, would do, or the doing of something which a reasonable and prudent man would not do. Negligence is the failure to use such care as a reasonably prudent and careful person would use under similar circumstances; it is the doing of some act which a person of ordinary prudence would not have done under similar circumstances or failure to do what a person of ordinary prudence would have done under similar circumstances. The term refers only to that legal delinquency which results whenever a man fails to exhibit the care which he ought to exhibit, whether it be slight, ordinary, or great. It is characterized chiefly by inadvertence, thoughtlessness, inattention, and the like, while "wantonness" or "recklessness" is characterized by willfulness. The law of negligence is founded on reasonable conduct or reasonable care under all circumstances of particular care. Doctrine of negligence rests on duty of every person to exercise due care in his conduct toward others from which injury may result.
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. (See INCOME and LOSS.)
Net Lease - In addition to the rental payment, the LESSEE assumes all property charges such as taxes, insurance, and maintenance.
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.
Non-for-Profit Organization/Tax-Exempt Organization - An incorporated organization which exists for educational or charitable purposes, and from which its shareholders or trustees do not benefit financially. Also called not-for-profit organization.
Nonresident Alien - Any citizen that is not a resident or citizen of the
Non Routine Transactions - Activities that occur only periodically, the data involved are generally not part of the routine flow of transactions.
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. (See STATED VALUE.)
Notional - Value assigned to ASSETS or LIABILITIES that is not based on cost or market
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R&D - See RESEARCH AND DEVELOPMENT.
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 Estate Investment Trust (REIT) - Investor-owned TRUST which invests in real estate and, instead of paying income tax on its income, reports to each of its owners his or her pro rata share of its income for inclusion on their income tax returns. This unique trust arrangement is specifically provided for in the INTERNAL REVENUE CODE.
Real Estate Mortgage Investment Conduit (REMIC) - An entity that holds a fixed pool of mortgages and issues multiple classes of interest s in itself to investors. A qualified REMIC is generally taxed like a partnership, unless it takes contributions after its start up day or engages in a prohibited transaction.
Real Property - Land and improvements, including buildings and PERSONAL PROPERTY, that is permanently attached to the land or customarily transferred with the land.
Reasonable Assurance - Management"s assessment of the effectiveness of internal control over financial reporting is expressed at the level of reasonable assurance. It includes the understanding that there is a remote likelihood that material misstatements will not be prevented or detected on a timely basis. It is a high level of assurance.
Recapitalization - An internal reorganization of a corporation including a rearrangement of the capital structure by changing the kind of stock or the number of shares outstanding or issuing stock instead of bonds. It is distinguished from most other types of reorganization because it involves only one corporation and is usually accomplished by the surrender by shareholders of their securities for other stock or securities of a different type.
Receivables - Amounts of money due from customers or other DEBTORS.
Reconciliation - Comparison of two numbers to demonstrate the basis for the difference between them.
Redemption Value - Price to be paid by an ENTITY to retire its BONDS or PREFERRED STOCK.
Red Herring - "Pre-release" PROSPECTUS offering. An announcement of a future issuance of SECURITIES, given restricted circulation during the waiting period of 20 days or other specified period between the filing of a registration statement with the SEC and the effective date of the statement. A red herring is not an offer to sell or the solicitation of an offer to buy.
Refinancing Agreement - Arrangement to provide funding to replace existing financing, the most common being a refinance of a home MORTGAGE.
Regulated Investment Company (RIC) - Commonly called a MUTUAL FUND, this is a domestic corporation that acts as an investment agent for its shareholders by typically investing in government and corporate securities and distributing the DIVIDENDS and INTEREST income earned from such investments. In order to be considered a RIC a CORPORATION must make an irrevocable election tax election in order to be treated as one.
Reinsurance - Process by which an insurance company obtains insurance on its insurance claims with other insurers in order to spread the risk.
REIT - See REAL ESTATE INVESTMENT TRUST.
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.
Relevant Assertions - Assertions that have a meaningful bearing on whether the account is fairly stated.
Reorganization - This is a change in the businesses capital arrangements. If for a CORPORATION there are seven statutory options for reorganization that would cause the corporation and shareholders to not recognize any GAIN or LOSS on the exchange of stock.
