Call Loan - Loan repayable on demand. Also known as
DEMAND LOAN.
Callable Instrument - BOND which accords an
issuer the right to redemption before it is due.
Cap - To limit. Capital - ASSETS intended to
further production. The amount invested in a
PROPRIETORSHIP, PARTNERSHIP, or CORPORATION by its
owners.
Capital Gain - Portion of the total GAIN
recognized on the sale or exchange of a noninventory
asset which is not taxed as ORDINARY INCOME. Capital
gains have historically been taxed at a lower rate than
ordinary income.
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.
Capitalized Interest - INTEREST cost incurred
during the time necessary to bring an ASSET to the
condition and location for its intended use and included
as part of the HISTORICAL COST of acquiring the asset.
Capitalized Lease - LEASE recorded as an ASSET
acquisition accompanied by a corresponding LIABILITY by
the LESSEE.
Capital Projects Funds - Funds used by a
not-for-profit organization to account for all resources
used for the development of a land improvement or
building addition or renovation.
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.
Carryovers - Provision of tax law that allows
current losses or certain tax credits to be utilized in
the tax returns of future periods.
Cash Basis - Method of bookkeeping by which
REVENUES and EXPENDITURES are recorded when they are
received and paid. (See OTHER COMPREHENSIVE BASIS OF
ACCOUNTING.)
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.
CD - See CERTIFICATE OF DEPOSIT.
Certificate of Deposit (CD) - Formal instrument
issued by a bank upon the deposit of funds which may not
be withdrawn for a specified time period. Typically, an
early withdrawal will incur a penalty.
Certified Financial Planner (CFP) - Individual
who is trained to develop and implement financial plans
for individuals, businesses, and organizations,
utilizing knowledge of income and estate tax,
investments, risk management analysis and retirement
planning. CFPs are certified after completing a series
of requirements that include education, experience,
ethics and an exam. CFPs are not regulated by a
governmental authority.
Certified Internal Auditor (CIA) - Internal
AUDITOR who has satisfied the examination requirements
of the Institute of Internal Auditors.
Certified Management Accountant (CMA) - An
accreditation conferred by the Institute of Management
Accountants that indicates the designee has passed an
examination and attained certain levels of education and
experience in the practice of accounting in the private
sector.
Certified Public Accountant (CPA) - ACCOUNTANT
who has satisfied the education, experience, and
examination requirements of his or her jurisdiction
necessary to be certified as a public accountant.
CFP - See CERTIFIED FINANCIAL PLANNER.
CIA - See CERTIFIED INTERNAL AUDITOR.
Clean Opinion - AUDIT opinion not qualified for
any material scope restrictions nor departures from
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). Also
known as UNQUALIFIED OPINION.
Closed-End Mutual Fund - MUTUAL FUND with a fixed
number of shares outstanding that may be bought or sold.
CMO - See COLLATERALIZED MORTGAGE OBLIGATION.
Collateral - ASSET provided to a CREDITOR as
security for a loan.
Collateralized Mortgage Obligation (CMO) -
SECURITY whose cash flows equal the difference between
the cash flows of the collateralizing ASSETS and the
collateralized obligations of a securitized TRUST.
Characteristics of CMO residuals vary greatly and can be
extremely complex in nature.
Combined Financial Statement - FINANCIAL
STATEMENT comprising the accounts of two or more
entities.
Comfort Letter - Letter provided by a company's
independent public accountant to an underwriter when the
underwriter has a DUE DILIGENCE responsibility under
Section 11 of the Securities Act of 1933 regarding
financial information included in an offering statement.
Committee of Sponsoring Organizations of the Treadway
Commission (COSO) - An alliance of five professional
organizations dedicated to the preservation of
fraudulent financial reporting.
Common Stock - CAPITAL STOCK having no
preferences generally in terms of dividends, voting
rights or distributions. (See PREFERRED STOCK.)
Comparative Financial Statement - FINANCIAL
STATEMENT presentation in which the current amounts and
the corresponding amounts for previous periods or dates
also are shown.
Compensatory Balance - Funds that a borrower must
keep on deposit as required by a bank.
Compilation - Presentation of financial statement
data without the ACCOUNTANT'S assurance as to conformity
with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP).
Compilation Engagement - Agreement between a CPA
firm and its client to issue a COMPILATI0N REPORT. (See
ACCOUNTANTS'REPORT.)
Compilation Report - See ACCOUNTANTS' REPORT.
Compliance Audit - Review of financial records to
determine whether the entity is complying with specific
procedures or rules. Compound Interest Principles -
Interest computed on principal plus interest earned in
previous periods.
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.
Conservatism - An investment strategy aimed at
long-term capital appreciation with low risk; moderate;
cautious; opposite of aggressive behavior; show possible
losses but wait for actual profits. Concept which
directs the least favorable effect on net income.
Consistency - ACCOUNTING postulate which
stipulates that, except as otherwise noted in the
FINANCIAL STATEMENT, the same accounting policies and
procedures have been followed from period to period by
an organization in the preparation and presentation of
its financial statements.
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. (See MERGER.)
Contingent Liability - Potential LIABILITY
arising from a past transaction or a subsequent event.
Continuing Operations - Portion of a business
entity expected to remain active.
Continuing Professional Education (CPE) -
Educational programs for CERTIFIED PUBLIC ACCOUNTANTS
(CPAs) to keep informed on changes that occur within the
profession. State Boards for Public Accountancy and the
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA)
each have separate CPE requirements.
Contra Account - ACCOUNT considered to be an
offset to another account. Generally established to
reduce the other account to amounts that can be realized
or collected.
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.
Convertible Stock - Stock that may be exchanged
for other SECURITIES of the issuer.
Corporation - Form of doing business pursuant to
a charter granted by a state or federal government.
Corporations typically are characterized by the issuance
of freely transferable CAPITAL STOCK, perpetual life,
centralized management, and limitation of owners'
LIABILITY to the amount they invest in the business.
Cost Accounting - Procedures used for rationally
classifying, recording, and allocating current or
predicted costs that relate to a certain product or
production process.
Cost Recovery Method - METHOD OF REVENUE
RECOGNITION which recognizes profits after costs are
completely recovered. Generally used only when the total
amount of collections is highly uncertain. In tax, the
ACCOUNTING METHOD used to depreciate ASSETS.
CPA - See CERTIFIED PUBLIC ACCOUNTANT.
CPE - See CONTINUING PROFESSIONAL EDUCATION.
Credit - Entry on the right side of a
DOUBLE-ENTRY BOOKKEEPING system that represents the
reduction of an ASSET or expense or the addition to a
LIABILITY or REVENUE. (See DEBIT.)
Credit Agreement - Arrangement in which one party
borrows or takes possession in the present by promising
to pay in the future.
Credit Balance - BALANCE remaining after one of a
series of bookkeeping entries. This amount represents a
LIABILITY or income to the entity. (See BALANCE.)
Creditor - Party that loans money or other ASSETS
to another party.
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.
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