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GLOSSARY
Acceptance
A positive response to an offer or counter-offer that enables the agreement between the parties.
Acceptance letter
An acceptance letter is written correspondence from a college or university notifying a prospective student that he or she has been approved for admission to the college or university.
Accident and health benefits
Accident and health benefits are provided by employers to compensate employees for expenses related to illness and accidental injury or death. Employers usually receive a deduction for providing this type of compensation to employees.
Accident and health insurance
Accident and health insurance provides coverage for accidental injury, illness, or death. Benefits include payment of medical expenses and payment of income. Some programs also allow for debt payments while the insured is unable to earn income.
Accommodation paper
An accommodation paper is a document executed by one party for the benefit of another. In practice, an accommodation paper is used as a loan guarantee, in which a third party agrees to repay the loan if the borrower does not.
Accommodative monetary policy
An accommodative monetary policy is a strategy implemented by a central bank (e.g., the Federal Reserve) to encourage economic growth. Generally, an accommodative monetary policy involves the lowering of interest rates so that money is less expensive for consumers and businesses to borrow.
Account
An account is a list of financial transactions. The term can refer to a deposit of money used for the purposes of checking, saving or investing, or it can mean a credit arrangement for the use of buying goods and services.
Account balance
Account balance is the net value of all deposits and withdrawals within a financial account as of a certain date. The balance represents the amount of money in the account.
Accountant
An accountant is a professional who manages and audits financial records and prepares financial statements and tax documentation for individuals and businesses. Accountants must understand and comply with financial reporting regulations.
Accounting method
Accounting method refers to the system of bookkeeping used by an individual or business. The two methods are accrual accounting and cash accounting. Cash accounting is the simpler of the two and the preferred choice for many small businesses.
Accounting period
An accounting period is an interval of time covered by a set of financial statements. With respect to tax accounting, the accounting period refers to the 12 months of activity reported in the calculation of income taxes.
Accounts payable
Accounts payable, or AP, represent money owed by a company or household for goods and services already received. These are short-term debt obligations. Businesses list AP as current liabilities on the balance sheet.
Accounts receivable
Accounts receivable, or AR, represent money owed to a company or household in the short-term for goods and services already provided. Businesses list AR as current assets on the balance sheet.
Accrual method
The accrual method is a system of bookkeeping that matches related revenues and expenses and records them when the transaction occurs, rather than when cash changes hands. For example, a sale made on credit would be recorded to income immediately, even though the company has not received cash payment for the sale. Certain related expenses, such as the cost of goods, would also be recorded, even if those were paid for in a prior period. The accrual method is also called accrual accounting or accrual basis accounting. Large businesses commonly use this method.
Accrued Interest
Accrued interest is unpaid interest that accumulates on the principal balance of a loan, adding to the total amount owed in a loan.