EA
An Enrolled Agent (IRS designation).

E&O Insurance
An errors and omissions, or E&O, liability policy (often called malpractice insurance) covers liability for negligent acts, errors and omissions committed by professionals, including physicians, accountants, lawyers, etc

E Bond
A U.S. government bond issued before 1980.

Early-Withdrawal Penalty
A fee charged to depositors if they withdraw their certificates of deposit (CDs) or saving deposits before the CDs or savings deposits reach maturity.

Earned Income
Income (as wages, salary, professional fees, or commissions) that results from the personal labor or services of an individual. It is that income realized by the provisioning of goods and services.

Earnest Money
A sum of money paid for property to assure the seller that the buyer is sincere. When the sales transaction is completed, the earnest money is counted toward the purchase price of the property.

Earning Power
Earnings before interest and taxes (EBIT) divided by total assets.

Earnings
A term that refers to the financial capacity of a corporation to make distributions to shareholders other than return of capital, e.g., dividends. See also RETAINED EARNINGS.

Earnings Per Share
The amount that each stock share earns in dividends after both preferred stockholders and taxes have been paid. These are earnings before extraordinary gains and losses, less preferred-share dividends, divided by all common shares outstanding at the most recent fiscal year end. Net income, or earnings, refers to the company's after-tax profits before extraordinary gains or extraordinary losses for the most recent annual period.

Econometrics
Literally means 'economic measurement'. It is the branch of economics that applies statistical methods to the empirical study of economic theories and relationships. It is a combination of mathematical economics, statistics, economic statistics and economic theory.

Economically Feasible
Means that the benefit of tracing the cost (greater accuracy) outweighs the cost of doing so.

Economic Book Value
Allows for a book value analysis that adjusts the assets to their market value. This valuation allows valuation of goodwill, real estate, inventories and other assets at their market value.

Economic Depreciation
The decline in real estate property value caused by external forces, such as neighborhood blight or adverse development.

Economic Entity
An accounting concept that provides context or “point of view” for the economic events (i.e., transactions) captured by the financial statements. In short, it answers the questions, “Whose asset is it?”; “Whose liability is it?”

Economic Income
The maximum amount that can be distributed to owners during the accounting period and leave the business as well off at the end of the accounting period as it was at the beginning of the period; i.e. cash flow based.

Economic Value (EV)
The value of an asset deriving from its ability to generate income.

Economic Value Added (EVA)
Measures the true economic profit of a business by comparing a firm’s profit to the return on investment that shareholders should have earned.

Economies of Scale
Based upon the theory that the more you produce of a good, the less that it costs for each additional unit, i.e., efficiency. Specifically, it is the reduction of the costs of production of goods due to increasing the size of the producing entity and the share of the total market for the good/product. The value of an asset deriving from its ability to generate income.

EE Bond
A U.S. government bond issued after 1980.

Effective Annual Yield
What a depositor earns on a certificate of deposit (CD) or savings account on a yearly basis, provided the money is not withdrawn.

Effective Interest Rate
The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the note.

Effective Tax Rate
The net rate a taxpayer pays on income that includes all forms of taxes. It is calculated by dividing the total tax paid by taxable income.

Efficient Market
Refers to an economic theory that says that today’s prices for securities and commodities are a measure of what investors think their prices will be in the future.

Efficient Market Theory
The hypothesis that market prices reflect the knowledge and expectations of all investors. Within this theory, investors who adhere to it believe it to be highly improbable that market movement can be predicted, i.e., using darts to chose stocks are just as effective as stock or market analysis.

Electronic Funds Transfer (EFT)
A payment executed through computers.

Embezzlement
Fraudulently appropriating money for personal use.

Employee Retirement Income Security Act of 1974 (ERISA)
Federal act describing how managers of profit-sharing funds and private pension funds may invest those funds. ERISA sets guidelines for fund managers.

Employee Stock Ownership Plan (ESOP)
A plan allowing employees to buy stock in the company they work for.

Encumbrance
Is a) a right or interest in land owned by someone other than the owner of the land itself; examples include easements, leases, mortgages, and restrictive covenants; or, b) in accounting, an encumbrance is an anticipated expenditure, or funds restricted for anticipated expenditures, such as for outstanding purchase orders.

Ending Inventory
Inventory at the end of the accounting period.

Enrolled Agent (EA)
Any individual who is enrolled under the provisions of Treasury Department Circular No. 230 to practice before the IRS.

Enterprise
An organization created for business ventures.

Entity
In business, is a separate or self-contained existence that provides goods or services.

Entity Assumption
The assumption that financial statements are prepared for an entity that is separate and distinct from its owners.




 

Entrepreneur
The person who assumes the financial risk of the initiation, operation and management of a given business or undertaking. He/She is primarily a financial and/or professional risk taker almost to the extreme.

Equity
Is, normally, ownership or percentage of ownership in a company or items of value.

Equity Accounting
The practice of showing in a company's accounts the share of undistributed profits of another company in which it holds equity ownership (usually below 50%). The share of profit shown is usually equal to its share of the equity in the other company. The profit may not actually be paid over, but the equity holding company has a right to this share of the undistributed profit.

Equity Fund
A mutual fund whose portfolio consists primarily of common stocks.

ERISA
In the U.S., refers to the Employee Retirement Income Security Act of 1974. ERISA is a major U.S. law which guarantees certain categories of employees a pension after some period at their employer; there had been more ambiguity before about what rules an employer could put on which employees could get a pension.

Error of Commission
An error that occurs as a result of an action taken. In accounting, the error occurs when one or both of the double entries are made in the correct class of account but the wrong account within that class.

Error of Omission
An error which occurs as a result of an action not taken. In accounting, the error occurs when both the entries required for a transaction are completely omitted from the books.

Escrow
An agreement whereby a deed, a bond, or property is held in trust by a third party until some obligation is fulfilled.

ESOP
A program by which a corporation's employees may acquire its capital stock.

Estate
A deceased’s property at the time of death. An estate is passed to the deceased’s heirs if he or she left a will. If not, the matter of how to divide the estate is decided by a probate court. It is the entire group of assets owned by an individual at the time of his or her death. The estate includes all funds, personal effects, interests in business enterprises, titles to property-real estate and chattels, and evidences of ownership such as stocks, bonds and mortgages owned, notes receivable, etc. All claims against an estate must be duly filed with the Executor or Administrator of the estate, and approved by the court of law under which the will is being probated or the line of heritage is being determined before the indebtedness may be satisfied.

Estate tax
Taxes levied by federal and state governments on the transfer of property from an estate to its beneficiaries. Estate taxes are paid by the estate. Inheritance taxes—taxes the heirs pay for the property they receive—are paid by heirs.

Ethical Standards
In accounting, is a written document containing basic principles and essential procedures together with related guidance in the form of explanatory and other material.

Ethics
In business, are moral and professional principles.




 

Euroization
The use of the euro by a country as its own currency; the linking of a currency’s value to that of the euro; or, the use of the euro for accounting purposes.

EV (economic value)
The value of an asset deriving from its ability to generate income.

Excess of Revenue Over Expenses
In the not-for-profit sector, there is a common misconception that not-for-profit organizations are not allowed to have a financial cushion as they are “not-for-profit”. In this context it is useful to remember that not-for-profit organizations are also “not-for-loss” organizations. An organization cannot sustain losses over the long term without ceasing to operate or going bankrupt. Excess of revenue over expenses is the planned financial position that there will always be a sufficient amount of funds on hand to continue to run the not-for-profit entity for some period without additional funding; usually 3-4 months.

Excise Taxes
Taxes on acts, not property. For example, sales of liquor are subject to excise taxes.

Executor
A legal entity, frequently an individual, known before death to a testator, who is named in the testator's will to carry out the desires of the deceased after his death as designated in the will. Executors must be approved by the court of law probating the will. An executor pays all indebtedness as claimed by creditors of the estate, with the approval of the court of law, and then carries out or executes the will according to the terms set forth by the testator. It is also the institution or person named in a will to manage the estate of the deceased. The executor pays taxes, distributes the estate’s assets, and pays estate debts.

Expropriation
The taking of property or rights by governmental authority such as eminent domain, possibly including an emergency situation, such as taking a person's truck or bulldozer to build a levee during a flood. In such a case just compensation eventually must be paid to the owner, who can make a claim against the taker

External Audit
An audit of a business conducted by an outside auditor to determine its financial soundness. Outside auditors have no stake in the business being audited and therefore can be considered a disinterested party.