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4401(k) PlanEmployee benefit plan authorized by Internal Revenue Code section 401(k), whereby an employer establishes an account for each participating employee and each participant elects to deposit a portion of his or her salary into the account. The amount deposited is not subject to income tax. This is the most common type of salary reduction plans. AA Misstatement is InconsequentialIf a reasonable person would conclude after considering the possibility of further undetected misstatements that the misstatement either individually or when aggregated with other misstatements would clearly be immaterial to the FINANCIAL STATEMENTS. If a reasonable person could not reach such a conclusion regarding a particular misstatement, that misstatement is more than inconsequential. AbatementComplete removal of an amount due, (usually referring to a tax ABATEMENT a penalty abatement or an INTEREST abatement within a governing agency). Absorption CostingAn approach to product costing that assigns a representative portion of all types of manufacturing costs--direct materials, direct labor, variable factory overhead, and fixed factory overhead--to individual products. Accelerated DepreciationMethod that records greater DEPRECIATION than STRAIGHT-LINE DEPRECIATION in the early years and less depreciation than straight-line in the later years of an ASSET'S HOLDING PERIOD. AccountFormal 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 PayableAmount owed to a CREDITOR for delivered goods or completed services. Account ReceivableClaim against a DEBTOR for an uncollected amount, generally from a completed transaction of sales or services rendered. Accountable PlanAny reimbursement or other expense allowance arrangement of an employer that meets all of the following requirements (therefore excluding it from gross w-2 EARNED INCOME and tax): (1) it provides reimbursements advances or allowances including per diem and meals, to employees for any job related deductible business expense; (2) employees must be able to substantiate expenses covered in the plan; (3) employee must return any excess advances or payments. AccountantPerson skilled in the recording and reporting of financial transactions. Accountants' ReportFormal 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 (AGREED-UPON PROCEDURES 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 accountants' report does not result from the performance of an AUDIT. AccountingRecording and reporting of financial transactions, including the origination of the transaction, its recognition, processing, and summarization in the FINANCIAL STATEMENTS. Accounting ChangeChange in (1) an accounting principle; (2) an accounting estimate; or (3) the reporting entity that necessitates DISCLOSURE and explanation in published financial reports. Accounting CycleThe sequence of steps followed in the accounting process to measure business transactions and transform the measurements into FINANCIAL STATEMENTS for a specific period. Accounting Principles Board (APB)Senior technical committee of the AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA) which issued pronouncements on accounting principles from 1959-1973. The APB was replaced by the FINANCIAL ACCOUNTING STANDARDS BOARD (FASB). Accounts Payable Subsidiary LedgerA financial record of an individual ACCOUNT PAYABLE in which entries can be made daily. Accounts Receivable TurnoverUsed to measure a company’s ability to collect cash from credit customers. Found by dividing net sales by average net ACCOUNT RECEIVABLE. AccrualThe recognition of an expense or revenue that has occurred but has not yet been recorded. Accrual AccountingThe attempt to record the financial effects of transactions and other events in the periods in which those transactions or events occur rather than only in the periods in which cash is received or paid by the business, using all the techniques developed by accountants to apply the MATCHING PRINCIPLE. Accrual BasisMethod of ACCOUNTING that recognizes REVENUE when earned, rather than when collected. Expenses are recognized when incurred rather than when paid. Accrued ExpenseAn expense that has occurred but is not recognized in the accounts. Accrued InterestINTEREST that has accumulated between the most recent payment and the sale of a BOND or other fixed-income security. Accumulated DepreciationTotal 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. AccumulationProfits that are not paid out as DIVIDENDS but are instead added to the company’s capital base. Acid-Test RatioThe relationship of a company’s current assets that can be converted into cash to its current liabilities. It is determined by dividing QUICK ASSETS by current liabilities. AcquisitionOne company taking over controlling interest in another company. ActuaryMathematician employed by an insurance company to calculate PREMIUMS, RESERVES, DIVIDENDS, and insurance, PENSION, and ANNUITY rates, using risk factors obtained from experience tables. Additional Paid in CapitalAmounts 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. Adjusted BasisAfter a taxpayer's basis in property is determined, it must be adjusted upward to include any additions of capital to the property and reduced by any returns of capital to the taxpayer. Additions might include improvements to the property and subtractions may include depreciation or depletion. A taxpayer's adjusted basis in property is deducted from the amount realized to find the gain or loss on sale or disposition. Adjusted Gross IncomeGross income reduced by business and other specified expenses of individual taxpayers. The amount of adjusted gross income affects the extent to which medical expenses, non business casualty and theft losses and charitable contributions may be deductible. It is also an important figure in the basis of many other individual planning issues as well as a key line item on the IRS form 1040 and required state forms. Adjusted Trial BalanceA trial balance prepared after all adjusting entries have been recorded and posted to the accounts. Should have equal credit and debit totals. Adjusting Journal EntryAn accounting entry made into a subsidiary ledger called the General journal to account for a periods changes, omissions or other financial data required to be reported "in the books" but not usually posted to the journals used for typical period transactions (the cash receipts journal, cash disbursements journal, the payroll journal, sales journal and so on) the entry is posted to the general ledger accounts directly and usually will be numbered itself, dated and have an explanation. Example: AJE# 1 12-31-2003, debit Cash in bank $1,000. Credit interest income $1,000, to record interest income on business bank account at year end, not recorded in cash receipts journal but credited by the bank. (Cross-reference bank reconciliation and account where it was found) |