Dairy Queen Accounting
A figure of speech from the steel industry meaning that some people don't know if they are doing accounting for Dairy Queen or a steel mill.

Data Fixation
In behavioral accounting, is a compulsive preoccupation to focus only upon the numbers without looking beyond for the meaning behind the results themselves.

Date Draft
A payment option draft that matures in a specified number of days after the date issued.

Date of Record
The date which determines which shareholders receive dividends.

DBA (doing business as) 
A legal entity (sole proprietorship, partnership, corporation) conducting business under any chosen name for which a business license has been issued.

Debenture
A corporate IOU that is not backed by the company's assets (unsecured) and is therefore somewhat riskier than a bond. Typically, unsecured bonds backed by the general credit of the issuer, not by the issuer’s assets.

Debit
An entry, made on the left side of a ledger, that records an expense or an asset. It is a record of an indebtedness; specifically : an entry on the left-hand side of an account constituting an addition to an expense or asset account or a deduction from a revenue, net worth, or liability account.

Debit Card
A banking card enhanced with automated teller machine (ATM) and point-of-sale (POS) features so that it can be used at merchant locations. A debit card is linked to an individual's checking account, allowing funds to be withdrawn at the ATM and point-of-sale without writing a check. Each financial institution creates an identity for its debit card to customize the product and differentiate it in the market. Debit cards can also be called deposit access cards.

Debit Memorandum
Can be either a) a form or document given by the bank to a depositor to notify that the depositor's balance is being decreased due to some event other than the payment of depositor originated check, e.g. bank service charges; or b) a form of document used by a seller to notify a buyer that the seller is debiting (increasing) the amount of the buyer's accounts payable due to errors or other factors requiring adjustments.

Debt
Something, (usually money) owed.

Debt Covenant
Is one of many terms used to describe rules governing the loans that a company has outstanding. Other related phrases would be "loan terms" "credit agreement," "loan agreement."

Debt Financing
Raising money through selling bonds, notes, or mortgages or borrowing directly from financial institutions. You must repay borrowed money in full, usually in installments, with interest. A lender incurs risk and charges a corresponding rate of interest based on that risk. The lender usually assesses a variety of factors such as the strength of your business plan, management capabilities, financing, and your past personal credit history, to evaluate your company’s chances of success.

Debt Instrument
A written promise to repay a debt. Examples: notes, bills, bonds, CDs, GICs, commercial paper, and banker's acceptances.

Debt Limit
The most that a government can legally borrow. State legislatures and constitutions decide the debt limits of state and local governments. The federal government can raise its debt limit as it pleases, since its limit is decided by Congress.

Debt Ratio
Measures the percent of total funds provided by creditors. Debt includes both current liabilities and long-term debt. Creditors prefer low debt ratios because the lower the ratio, the greater the cushion against creditor's losses in liquidation. Owners may seek high debt ratios, either to magnify earnings or because selling new stock would mean giving up control. Owners want control while "using someone else's money." Debt Ratio is best compared to industry data to determine if a company is possibly over or under leveraged. The right level of debt for a business depends on many factors. Some advantages of higher debt levels are:
a) The deductibility of interest from business expenses can provide tax advantages.

b) Returns on equity can be higher.

c) Debt can provide a suitable source of capital to start or expand a business.

Some disadvantages can be:

a) Sufficient cash flow is required to service a higher debt load. The need for this cash flow can place pressure on a business if income streams are erratic.

b) Susceptibility to interest rate increases.

c) Directing cash flow to service debt may starve expenditure in other areas such as development which can be detrimental to overall survival of the business.

Debt Service
Interest or principal payments on a mortgage. Debt service usually describes either the monthly payments or the total annual payment.

Debt Service Coverage
The ratio of cash flow available to pay for debt to the total amount of debt payments to be made (interest and principal payments).

Debt Service Ratio
The measurement of debt payments to gross income.

Debt to Equity
Measures the risk of the firm's capital structure in terms of amounts of capital contributed by creditors and that contributed by owners. It expresses the protection provided by owners for the creditors. In addition, low Debt/Equity ratio implies ability to borrow. While using debt implies risk (required interest payments must be paid), it also introduces the potential for increased benefits to the firm's owners. When debt is used successfully (operating earnings exceeding interest charges) the returns to shareholders are magnified through financial leverage. Depending on the industry, different ratios are acceptable. The company should be compared to the industry, but, generally, a 3:1 ratio is a general benchmark. Should a company have debt-to-equity ratio that exceeds this number; it will be a major impediment to obtaining additional financing. If the ratio is suspect and you find the company's working capital, and current / quick ratios drastically low, this is a sign of serious financial weakness.

Debtor
The party against who one has a claim. A person who owes a debt

Debtor Days 
A ratio used to work out how many days on average it takes a company to get paid for what it sells. It is calculated by dividing the figure for trade debtors shown in its accounts by its sales, and then multiplying by 365.

Debtors Control Account
Reflects the total amount owed by the all the individual debtors. The balance of the debtors control account must equal the total of the debtors list, which represents the amounts owed by the individual debtors obtained from the individual balances in the various subsidiary ledger accounts for each debtor. This subsidiary ledger is known as the debtors' ledger.

Decedent
Legal term for a person who has died.

Decision Theory
A body of knowledge and related analytical techniques of different degrees of formality designed to help a decision maker choose among a set of alternatives in light of their possible consequences.

Declining-Balance Depreciation Method
Is an accelerated depreciation method in which an asset's book value is multiplied by a constant depreciation rate (such as double the straight-line percentage, in the case of double-declining-balance.). This depreciation method is allowed by the U.S. tax code and gives a larger depreciation in the early years of an asset. Unlike the straight line and the sum of the digits methods, both of which use the original basis to calculate the depreciation each year, the double declining balance uses a fixed percentage of the prior year's basis to calculate depreciation. The percentage rate is 2/N where N is the life of the asset. With this method, the basis never becomes zero. Consequently, it is standard practice to switch to another depreciation method as the basis decreases. Usually the taxpayer will convert to the straight line method when the annual depreciation from the declining balance becomes less than the straight line.

Decretion
Is a decrease. See also ACCRETION.

Dedicated Transactions
In securities, is a list all the transactions (including cash) for each portfolio together with any relevant fees and notes. And, not only can one monitor profit/loss but you can also chart the historical valuation of a portfolio, monitor the annualized rate of return, compare portfolio performance against indices or sectors and chart the performance of different constituents of a portfolio on a single chart.

Deductive Accounting Theory
(mathematical method) assumes that optimal accounting standards and reporting rules can be derived by deduction much in the way that Pythagoras derived the rule for measuring the hypotenuse of a triangle based upon square root of the summed squares of the other two sides (assuming one angle is a perfect 90-degree angle).

Deed
A signed document describing a legal agreement or contract.

Deed of Trust
A legal document giving the bearer title to a property. Banks usually hold the deed of trust until the borrower has paid the mortgage in full. After that, title is given over to the borrower. See TRUST DEED.

Default
To fail to repay a loan or meet an obligation. In finance, default is what occurs when a party is unwilling or unable to pay their debt obligations. This can occur with all debt obligations including bonds, debentures, mortgages, loans, and notes. Default can also occur with sovereign bonds, that is, governments can default on their payments to creditors. In corporate finance, a default is typically a prelude to bankruptcy. With most mortgages and loans the total amount owing becomes immediately payable on the first instance of a default of payment.

Defeasance
Is the release of a debtor from the primary obligation for a debt. A legal defeasance could take place in absolute terms, i.e., the debt could cease to exist for anyone (by being forgiven or set aside), or the creditor could formally recognize that another party has taken over the primary obligation for the debt.

Default Risk
The risk that a bond issuer will not be able to pay either the interest or principal.

Deferred
In accounting, is any account where the asset or liability is not realized until a future date, e.g. annuities, charges, taxes, income, etc. The deferred item may be carried, dependent on type of deferral, as either an asset or liability

Deferred Annuity
An annuity whose payments, by agreement, will begin in the future.

Deferred Asset
An amount owed to an entity that is not expected to be received by that entity within one year from the date of the balance sheet.

Deferred Compensation
Earnings to be received in the future, not when they are earned. Deferring compensation sometimes has tax advantages.

Deferred Gifts
Gifts to a charity or nonprofit organization that are to be given at the time of the giver’s death. Arrangements for giving deferred gifts are sometimes written into wills.

Deferred Income
That income for which the cash has been collected by the company, but have yet to be "earned". For example, a customer pays their annual software license upfront on the 1st Jan. As the company financial year-end is 31st May, the company would only be able to record five months of the income as turnover in the profit and loss account. The rest would be accrued in the balance sheet as a "deferred" creditor.

Deferred Payment
A privilege sometimes offered to renters, credit-card holders, and others to skip or postpone payments. Deferred payments are usually offered as a sign-on incentive.

Deferred Tax Liabilities  
Have an effect of increasing future year's income tax payments, which indicates that they are accrued income taxes and meet definition of liabilities. Whereas deferred tax assets have an effect of decreasing future income tax payments, which indicates that they are prepaid income taxes and meet definition of assets.

Deficit Spending
An excess of government expenditures over government revenue, resulting in a shortfall that must be financed through borrowing.

Deficiency
The amount by which a taxpayer fails to fulfill tax obligations. For example, if you underpay by $500, that is a $500 deficiency.

Deficiency Judgment
A court order giving a lender authority to collect part of the proceeds from a sale of property, when the seller of the property has defaulted on a mortgage or other financial obligation.

Defined Benefit Plan
A retirement plan set up for a corporation’s employees that promises specific benefit amounts. These plans pay no taxes on their investments and must be managed according to federal standards.

Defined Contribution
A pension design that defines the amount of contributions, usually a percentage of salary. The benefits payable at retirement depend on factors such as future investment return and annuity rate at retirement. If a plan is registered for tax purposes, the maximum contribution amount (usually a percentage of earnings or income up to a dollar limit) is defined by tax regulations.

Defined Contribution Plan
Blanket term for various plans by which employees can make tax-deferred contributions to retirement plans.

Deflation
A decline in prices. Inflation, a rise in prices, is the opposite of deflation. It is a contraction of economic activity resulting in a decline of prices.

Delivery Order
A document from the consignee, shipper, or owner of freight ordering the release of freight to another party.

Demand Deposit
A bank deposit from which withdrawals may be made without notice.

Demand Draft
Also known as sight draft, is a draft payable on demand from the date of issue, e.g. a payroll check.

Demand Note
A note payable on demand from the person who is owed the money.

Deminimus
Root is 'De minimis non curat lex' (Latin), a common law principle whereby judges will not sit in judgment of extremely minor transgressions of the law. It has been restated as "the law does not concern itself with trifles". It is commonly used to include a test of anyone judging conformance to accounting principles, regulations or rules.

Demutalization
Refers to the demutualizing of an insurance company. The proceeds from such an event are normally distributed to the policyholders in the form of either cash, shares, or a combination thereof in the surviving entity.

Dependent
Generally, is a person who relies on another person for support (especially financial support); in U.S. tax law, it means a dependent as defined in tax code Section 152 which excludes those individuals who do not qualify for a dependent deduction on the employee’s tax return including domestic partners and parents.

Depletion
The process of cost allocation that assigns the original cost of a natural resource to the periods benefited. For example: a mining company purchases mineral rights to a deposit for $5 million for a period of ten years. The cost of the natural resource, $5 million, will be depleted over the ten years of the benefit; i.e., it is the physical exhaustion of a natural resource (e.g., timber, oil and coal).

Deposit
Money placed in a bank account by deposit.

Deposit Insurance
Insurance on bank deposits to protect depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC), a government agency, insures bank accounts up to $100,000.

Deposits in Transit
Deposits made to a bank account that have not been credited to the bank statement.

Depository Account
Are those accounts where assets; e.g. cash or securities; are placed on deposit in favor of the depositor.

Depreciated Historical Cost (DHC)
The method of valuation of certain assets at the actual cost of their acquisition and subsequent enhancement less a reduction for depreciation to date.

Depreciation
The decline in value of an asset. Also, the allocation of an asset’s cost as expense over the life of the asset. It is the amount of expense charged against earnings by a company to write off the cost of a plant or machine over its useful live, giving consideration to wear and tear, obsolescence, and salvage value. If the expense is assumed to be incurred in equal amounts in each business period over the life of the asset, the depreciation method used is straight line (SL). If the expense is assumed to be incurred in decreasing amounts in each business period over the life of the asset, the method used is said to be accelerated. Two commonly used variations of the accelerated method of depreciating an asset are the sum-of-years digits (SYD) and the double-declining balance (DDB) methods. Frequently, accelerated depreciation is chosen for a business' tax expense but straight line is chosen for its financial reporting purposes.

Depreciation Convention
Is utilized to determine how much depreciation to charge the first year when an item is bought part way through the year.

Depreciation Schedule
The statement, over time, as to the schedule (timing and amounts) of depreciation of any long-term asset. A depreciation schedule is used for any type of depreciation applicable, i.e., either straight line or accelerated depreciation. See DEPRECIATION.

Deregulation
A loosening of government regulations concerning business activity. Deregulation is supposed to stimulate business competition and make for a more prosperous economy.

Derivative
A security whose value is based on, or derived from, a stock or bond. Options to buy and sell stocks are derivatives, for example. A transaction or contract whose value depends on or, as the name implies, derives from the value of underlying assets such as stock, bonds, mortgages, market indices, or foreign currencies. One party with exposure to unwanted risk can pass some or all of the risk to a second party. The first party can assume a different risk from a second party, pay the second party to assume the risk, or, as is often the case, create a combination. Derivatives are normally used to control exposure or risk. See DERIVATIVE CONTRACT.

Derivative Contract
Is, generally, a financial contract the value of which is derived from the values of one or more underlying assets, reference rates, or indices of asset values, or credit-related events. Derivative contracts include interest rate, foreign exchange rate, equity, precious metals, commodity, and credit contracts, and any other instruments that pose similar risks. See DERIVATIVE.

Derivative Liabilities
Financial instruments under contracts that have one or more underlying and one or more notional amounts. See DERIVATIVE.

Devaluation
In economics, is the lowering in value of one currency in relation to other currencies.

Diluted Earnings Per Share
Earnings per share, including common stock, preferred stock, unexercised stock options, and some convertible debt. Diluted earnings per share are usually a more accurate reflection of the company's real earning power.

Direct Cost
That portion of cost that is directly expended in providing a product or service for sale and is included in the calculation of COST OF GOODS SOLD, e.g. labor and inventory (it can be traced to a given cost object in an economically feasible manner). Opposite of indirect cost.

Direct Expense
That portion of expense that is directly expended in providing a product or service for sale and is included in the calculation of COST OF GOODS SOLD, e.g. labor and inventory.

Direct Financing Lease
Is one in which the lessor’s only source of revenue is interest. The lessor (generally a bank or other financial institution) buys an asset and leases it to the lessee. This transaction is an alternative to the more-customary lending arrangement in which a borrower uses the loan proceeds to purchase an asset. A direct financing lease is the functional equivalent of a loan.

Director's Report
Written by the Directors of a company and forms part of the company's financial statements. This report must support and elaborate on the information contained in the Income Statement, Balance Sheet and Source and Application of Funds Statement.

Directors Responsibility Statement
Contains written assurances from the board of directors that all company policies are followed: i) in the preparation of the Annual Accounts, the applicable Accounting Standards and there are no material departures; ii) selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period.

Directors Valuation
A valuation that is not an independent valuation.

Direct Write-Off Method
A method of recognition of uncollectible accounts only when known to be such.

Disability Insurance
In the United States, is a payroll tax required in some states that is deducted from employee paychecks to insure income during periods where an employee is unable to work due to an injury or illness.

Disburse/Disbursement
The paying out of money to satisfy a debt or an expense.

Disclosure Principle
States that any and all information that affects the full understanding of a company's financial statements must be include with the financial statements. Some items may not affect the ledger accounts directly. These would be included in the form of accompanying notes. Examples of such items are outstanding lawsuits, tax disputes, and company takeovers.

Discount
is a decrease in value (often due to interest to be earned) or decrease in price.

Discount Point
One percent of the principal of a mortgage. Home buyers typically pay the lender 1 discount point when their loans close.

Discount Rate
Rate used to measure the value of money over time. As a practical matter, a discount rate is the same thing as an interest rate.

Discount Yield
Method for computing Treasury Bill yields, in which the par value is computed instead of the purchase price. The formula for computing discount yields is the discount, divided by the par value amount multiplied by 360, divided by the number of days to maturity.

Discounted Cash Flow
A mathematical technique used by financial analysts in which future-day dollars are converted into present-day dollars by adjusting for inflation and compound interest. A company’s overall value (its share price times the number of shares outstanding) is typically calculated using discounted cash flow calculations.

Discounted Earnings
Determines the value of a business based upon the present value of projected future earnings, discounted by the required rate of return (capitalization rate). Usually, the question is how well earnings are projected.

Discounting
The selling of accounts receivable to a financial entity.

Discretionary
Means it is not mandatory, it is up to the individual or company.

Discretionary Cost
Can be increased or decreased at the discretion of the decision maker (e.g., advertising and business travel).

Discretionary Income
Means the amount of a company's income available for spending after the essentials have been met. See DISPOSABLE INCOME.

Dishonored Note
A note on which a debtor has defaulted.

Disintermediation
When investors pull their money out of interest-earning bank accounts and reinvest it in other places, such as stocks and money market funds.

Disposable Income
The money left over for buying things or investing after taxes are paid. It is the amount of an individual's income left after taxes which is available for spending and / or savings. See DISCRETIONARY INCOME.

Dissolution
The act of ending, terminating or winding-up a company or state of affairs. For example, when the life of a company is ended by normal legal means, it is said to be "dissolved". The same is said of marriage or partnerships which, by dissolution, ends the legal relationship between those persons formally joined by the marriage or partnership.

Distributions 
Payments from fund or corporate cash flow. May include dividends from earnings, capital gains from sale of portfolio holdings and return of capital. Fund distributions can be made by check or by investing in additional shares. Funds are required to distribute capital gains (if any) to shareholders at least once per year. Some corporations offer Dividend Reinvestment Plans (D.R.P.).

Distributions to Owners 
Payment of earnings to owners of a business organization in the form of a dividend. A dividend is a distribution to a corporation's stockholders usually in cash; sometimes in the corporation's stock and much less frequently in property (usually other securities).

Diversification
Investing in many different areas—real estate, stocks, and bonds, for example—as a hedge against decline in one area. Diversification really means not putting all your eggs in one basket.

Divest
To sell off assets or businesses because they are unprofitable or because they don’t fit in a company’s plans for the future.

Dividend
A profit share paid out to a stockholder.

Dividend Capitalization:
Since most closely held companies do not pay dividends, when using dividend capitalization valuators must first determine dividend paying capacity of a business. Dividend paying capacity based on average net income and on average cash flow are used. To determine dividend paying capacity, near term capital needs, expansion plans, debt repayment, operation cushion, contractual requirements, past dividend paying history of a business and dividends of a comparable company should be investigated. After analyzing these factors, percent of average net income and of average cash flow that can be used for the payment of dividends can be estimated. What also must be determined is the dividend yield, which can best be determined by analyzing comparable companies. As with the price earnings ratio method, this usually produces a subjective result.

Dividends Per Share (DPS)
This ratio is very similar to the EPS: EPS shows what shareholders earned by way of profit for a period whereas DPS shows how much the shareholders were actually paid by way of dividends. The formula: Dividends per share = Dividends paid to equity shareholders / Average number of issued equity shares.

Dividend Yield 
The annual rate of return, expressed as a percentage, on an investment.

Division
A self sufficient unit within a company. A division contains all the functions necessary to operate independently from the parent company.

Doctrine
Is a) something that is taught; b) a principle or position or the body of principles in a branch of knowledge or system of beliefs; c) a principle of law established through past decisions; d) a statement of fundamental government policy especially in international relations.

Document Retention Policy
A set of guidelines that a company follows to determine how long it should keep certain records, including e-mail and web pages. The policy is important for many reasons, including legal requirements that apply to some documents. For example: a) for tax-related items - the recommended retention is seven years; and, b) for real estate records - the recommended retention is twenty years.

Dollarization 
The use of U.S. dollars by a country as its own currency; the linking of a currency’s value to that of the U.S. dollar; or, the use of the U.S. dollar for accounting purposes.

Donated Assets
Assets received in a voluntary non-reciprocal transfer from another entity such as gifts of capital assets; usually voluntary contributions of resources to a governmental entity by a non-governmental entity.

Donated Capital
A gift of assets to a company, usually by state or local governments, to induce a business to relocate to their jurisdiction.

Doomsday Ratio
Related to the quick (acid test) ratio in that it is a conservative approach to debt coverage. The doomsday ratio only considers the cash on hand when evaluating if an entity can cover their current liabilities. The approach is that if the business were to go bankrupt today, would the business have enough cash on hand to cover current debts. The ratio is considered a good indicator of the cash cushion of safety. It may spot cash shortages, thereby assisting in avoiding a credit crisis. It is calculated: Cash divided by Current Liabilities.

Double Accounting
The un-intentional, or sometimes fraudulently intentional, double counting of assets or liabilities, or any other datasets, which, in the end, give an inaccurate view of what the data really means. In accounting, this is usually caused by a multiplicity of entries of the same data which, in the end, causes confusion or financial reporting inaccuracies.

Double Declining Balance Depreciation See DECLINING BALANCE DEPRECIATION.

Double-Entry Accounting 
A system of recording transactions in a way that maintains the equality of the accounting equation. The accounting technique records each transaction as both a credit and a debit. Double-entry bookkeeping (DEB) or accounting was developed during the fifteenth century and was first recorded in 1494 as a system by the Italian mathematician Luca Pacioli.

Double Taxation
Refers to federal taxes on corporate earnings and how these earnings are taxed twice: once in the form of corporate taxes and again when earnings are distributed to shareholders.

Dow Jones Industrial Average
An index that tracks the daily share value of 30 large US companies listed on the New York Stock Exchange. The Dow Jones generally mirrors the exchange as a whole.

Draft
In import / export, is a contract between buyer and seller that the buyer will pay a certain amount of money, within a specified period of time, for the goods purchased.

Drawee
The bank on which a check is drawn. Also, is the buyer of a draft instrument.

Drawer
The person who writes, or draws, a check that is to be paid by the drawee. The drawee is the bank where the check writer keeps a checking account.

Drop Ship 
Where the seller/retailer of a product ships the product directly from the manufacturer to the customer without requiring inventory carrying by the seller/retailer.

Due Diligence
The responsibility of bank officers to evaluate loan applications in a prudent and forthright manner. Due diligence is a credo of the banking industry.

Dumping
Selling large amounts of stock in order to make share prices drop or the market itself decline. It is the selling of merchandise in a foreign country at, or, below cost in order to seize market share.

Dun & Bradstreet (D&B)
A company that rates corporations’ financial performance and condition for the benefit of investors. By the way, if your business has been in existence for any length of time, there’s a good chance that Dun & Bradstreet has rated your firm’s financial performance and condition, too.

Duration
For a fixed-income security, the average time it takes to collect all payments of interest and principal.

Dutch Auction
Gradually lowering the price of a security until a buyer is found. The Dutch auction system is used in securities underwriting.

Duty
A tax imposed by a customs authority on imported goods. Often used interchangeably with the term "tariff".