Terms and Definitions and FAQs
Explore this resources page to find definitions of commonly used terms in the field along with answers to FAQs.
403B Plan: “A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers. Individual accounts in a 403(b) plan can be any of the following types. An annuity contract, which is a contract provided through an insurance company, a custodial account, which is an account invested in mutual funds, or a retirement income account set up for church employees. Generally, retirement income accounts can invest in either annuities or mutual funds. We use the term “403(b) account” to refer to any one of these funding arrangements throughout this
Accounting: Practice and body of knowledge concerned primarily with:
- Methods of recording transactions
- Keeping financial records
- Performing internal audits
- Reporting and analyzing financial information to the management
- Advising on taxation matters
Accredited investor: The requirement of SEC registration of publicly traded securities was instituted to protect the average investor. Registration, while not guaranteeing the quality of the investment, ensures that sufficient information has been made public for the investor to make an informed investment decision. To invest in private equity funds, hedge funds, and other non-registered investments, the investor must be considered accredited. To qualify as an accredited investor an individual must have
Activity Driver: A variable used in assignment costs to cost objects.
Cost Driver: A factor that drives cost and it is used in assigning activity cost pools to products and services.
Activity-based costing: Accumulates overhead costs for each organizational activity and then assigns the costs of the activities to the products, services, or customers causing that activity.
Budgets: Establishing specific goals, executing plans to achieve the goals, and periodically comparing actual results with the goals.
Cost accounting: A branch of management accounting concerned with accumulating manufacturing costs for financial reporting and decision-making purposes.
Crowd funding: Many individuals (i.e., a crowd) pooling their money to fund the endeavors of an individual, organization, or firm.
Entrepreneur: An individual who comes up with the idea for a business enterprise and is willing to accept all the associated financial and personal risks.
Equity capital: An investment representing an ownership claim on a project or firm. Holders of equity capital share in the gains and losses of the endeavor. Contrast with debt capital that represents loaning money to the firm or endeavor. Holders of debt (i.e., loan documents) expect to receive interest payments and the ultimate return of the amount loaned (i.e., the principal).
Employee Benefits Programs: “In general, indirect and non-cash compensation paid to an employee. Some benefits are mandated by law (such as social security, unemployment compensation, and workers compensation), others vary from firm to firm or industry to industry (such as health insurance, life insurance, medical plan, paid vacation, pension, gratuity).”
Enron: A company that infamously created and presented fraudulent financial statements.
Fraud: Act of deception, intentional concealment
Gift: Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.
Independent accountant: Generally, an independent accountant is an outside accountant; an accountant not on the client’s payroll. In the same way, an independent auditor is free from any influence from the client and thus can produce totally objective auditing reports.
Intellectual resources: The expertise, experience, skills, etc. that a contributor brings to the crowd funding endeavor.
Manipulation: Influence over a person or action for one’s own personal gain
Mezzanine Financing: A capital structure in the form of subordinated debt and/or preferred equity instruments.
Not-for-Profit (NFP): This type of accounting involves non-profit companies like universities, medical institutions, and federal/
Offering: In terms of publicly traded securities, the word offering can take two meanings. First, a firm can plan to have a security offering. This is when the securities are sold (offered) to the public. Next, the securities themselves are sometimes considered the offering. If a firm sold $100 million worth of bonds in January 2014, for example, those bonds are distinguished from other bonds issued by the same firm by calling them the January 2014 offering.The income generated from
Overstatement of Revenue: A company claims to have taken in more money than it did to show that the company is worth more
Payment Terms: The conditions under which a seller will complete a sale. Typically, these terms specify the period allowed to a buyer to pay off the amount
PIK Interest: Payment in kind interest is when interest is not paid in cash, but rather, is added to the principal balance of the note and subsequent interest accrues on the compounded amount.
SEC: Securities and Exchange Commission – Reviewer of all publicly traded companies’ financial statements
SOX: Sarbanes-Oxley Act passed July 2002 to ensure financial statements are fraud free
Subordinated Debt: A debt that represents a claim on assets that ranks after all senior debts in the event of liquidation or bankruptcy.
Sundance Film Festival: The Festival was started in 1981 by Robert Redford in Sundance, Utah, and provides a stage for independent artists to explore the viability of their films without commercial and political pressures. The festival itself is now held in Park City, Utah. The Sundance Institute, which runs the festival, is actually a form of crowd funding, in that the Institute accepts donations via the Internet and other means to help aspiring film writers and producers. See www.sundance.org for more information and to purchase tickets to the next festival!
Traditional Accounting System: The allocation of manufacturing overhead costs to the products manufactured. The system allocates the factory’s indirect costs to the item manufactured on the basis of volume.
Uncertain sales: Sales that have not yet gone through as sales
U.S. Securities and Exchange Commission (SEC): Following the Great Depression, the Securities Exchange Act of 1934 created the U.S. Securities and Exchange Commission. “The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” See www.sec.gov for a complete discussion of the development of the SEC and its mission.