• Balance sheet: The financial statement that presents a snapshot of the company’s financial position as of a particular date in time. It’s called a balance sheet because the things owned by the company (assets) must equal the claims against those assets (liabilities and equity).

• Assets: All the things a company owns in order to successfully run its business, such as cash, buildings, land, tools, equipment, vehicles, and furniture.

• Liabilities: All the debts the company owes, such as bonds, loans, and unpaid bills.

• Equity: All the money invested in the company by its owners. In a small business owned by one person or a group of people, the owner’s equity is shown in a Capital account. In a larger business that’s incorporated, owner’s equity is shown in shares of stock.

  Another key Equity account is Retained Earnings, which tracks all company profits that have been reinvested in the company rather than paid out to the company’s owners. Small businesses track money paid out to owners in a Drawing account, whereas incorporated businesses dole out money to owners by paying dividends.

INCOME STATEMENT TERMINOLOGY

Here are a few terms related to the income statement that you’ll want to know:

• Income statement: The financial statement that presents a summary of the company’s financial activity over a certain period of time, such as a month, quarter, or year. The statement starts with Revenue earned, subtracts the Costs of Goods Sold and the Expenses, and ends with the bottom line — Net Profit or Loss.

• Revenue: All money collected in the process of selling the company’s goods and services. Some companies also collect revenue through other means, such as selling assets the business no longer needs or earning interest by offering short-term loans to employees or other businesses.

• Costs of goods sold: All money spent to purchase or make the products or services a company plans to sell to its customers.

• Expenses: All money spent to operate the company that’s not directly related to the sale of individual goods or services.

• Reach your life’s goals. First figure out what your priorities and goals in life are, then work out a realistic saving and spending plan that helps you achieve those goals.

• Calculate how much your regular expenses are. Allocating money for every expense puts you in control of your money, deciding how your money’s used and helping you pay your bills on time. You have the power to make better decisions on how you spend your income.

• Know just how much your regular income is. The amount you actually earn after tax may be less than you think. So, unless you change jobs or take a second job, you need to live within your means. By bringing spending in line with income, you ensure you don’t accumulate unmanageable debt and risk your good credit standing.

• Prepare for unexpected events. An expected cost, such as a large dental bill, can blow your budget. To lessen the pain, it’s wise to budget for emergencies.

• Get and stay out of debt. Because budgeting brings expenses in line with income, your debt level falls. Making regular payments can get you right out of debt.

• Build your credit. Pay off the balances on your credit cards, for example, and both your available credit and financial standing go up.

• Reduce stress. Gaining control over your finances relieves the constant worry over money, which can cause sleepless nights, reduced productivity at work and, at worst, family breakdown.

Academic Appointment: An appointment for the nine-month period corresponding to the appropriate academic calendar. This is a special kind of cyclic appointment. This type of appointment is not used for classified staff.

Account: Budget-project combination which defines a specific economic activity. The account is used as the key for the Master Account Table and may be used to derive the remaining elements of the coding (e.g., fund, appropriation, program).

Account Entity: A primary entity which provides financial resources for a position.

Accrual: When there is a difference between what is allocated per pay cycle versus what is expensed, an accrual occurs. This term of accrual is somewhat misnamed and would be better understood if it were termed ‘allocation adjustment’. An accrual is a flow of dollars from an operating account, typically to a reserve account. An accrual occurs when there is a difference between what is planned and what has actually happened.

ACH: Automated Clearing House. An agency which acts as an electronic transfer center. Used by payroll for direct deposit of employee payments. (Commonly used as a reference term for the direct deposit system.)

ACS: Administrative Computing Services. That portion of Systems and Computing which works with on campus units on their system development and production needs.

Adjustment Worksheet: Form used for one-time deductions (DS transactions), refunds (RF transactions), hour balance adjustments (HA transactions) and dollar balance adjustments (DA transactions).

Advice: Report to employees whose pay is direct deposited showing gross pay, reductions, deductions, contributions, net pay, selected year-to-date totals and bank account number.

AIS: Administrative Information Systems. Terminal control for accessing on-line systems at Washington State University.

ALC: Annual Leave Cashout. Earnings type used when paying terminal annual leave hours above 240 for classified staff on separation. These earnings are not subject to PERS deductions.

Allocation: The process by which Washington State University specifies where the state allocated dollars are to be expended.

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ALP: Annual Leave Payoff. Earnings type used when paying the first 240 hours of terminal annual leave for classified staff. These earnings are subject to PERS deductions.

Annual Appointment: An appointment for twelve months (with provisions for annual leave in the case of non-classified staff).

Acquisition indebtedness – This is the technical term that Congress uses for what most of us call home mortgage debt, on which the interest is deductible. To qualify, the debt must be used to buy, build or improve your principal residence or second home and must be secured by the property. The interest paid on up to $1 million of acquisition indebtedness is deductible if you itemize deductions. The interest on an additional $100,000 of debt can be deductible if certain requirements are met.

Active participation – The level of involvement that real estate owners must meet to qualify to deduct up to $25,000 of passive losses from rental real estate. Failure to pass this test could make such losses nondeductible under passive-loss rules. (see passive loss rules below.)

Additional child tax credit – You may qualify for this credit if the regular child credit more than wipes out your tax liability. This additional credit can trigger a refund check from the IRS even if you don’t owe any tax.

Adjusted basis – Your basis in property is the starting point for determining whether you have a gain or loss when you sell it. (This is sometimes referred to as cost basis, tax basis or simply, basis.) The basis generally starts out as what you pay for the property, although special rules apply to assets you inherit or receive as a gift. The basis can be adjusted while you own property. When you buy rental property, for example, the basis begins at what you pay for the place, including certain buying expenses, and it is adjusted upward by the cost of permanent improvements. The basis is reduced by the amount of any depreciation you are allowed to deduct while you own the property. You use your adjusted basis to figure the gain or loss on the sale.

Adjusted Gross Income (AGI) – This is your income from all taxable sources, minus certain adjustments, and is the key to determining your eligibility for certain tax benefits and the phase-out of your eligibility for others. Adjusted Gross Income is also the amount from which deductions (the standard deduction or itemized deductions) and personal and dependent exemptions are deducted to arrive at the amount of taxable income that will actually be taxed. The adjustments—sometimes called above-the-line deductions because you can claim them whether or not you itemize deductions—include (among other things) deductible contributions to Individual Retirement Accounts (IRAs), SIMPLE and Keogh plans, contributions to Health Savings Accounts (HSAs), job-related moving expenses, any penalty paid on early withdrawal of savings, the deduction for 50 percent of the self-employment tax paid by self-employed taxpayers, alimony payments, up to $2,500 of interest on higher education loans and certain qualifying college costs.

Adoption credit – This credit effectively refunds to you part of what you pay to adopt a qualifying child. An eligible child is generally one under age 18 or one who is physically or mentally incapable of caring for him or herself. If you adopt a special-needs child, you may be eligible for a credit that exceeds your actual costs. The right to the credit phases out as AGI rises.

Alimony – Qualifying payments to an ex-spouse that can be deducted as adjustments to income whether or not you itemize. The recipient must include the payments in his or her taxable income.

Alternative Minimum Tax (AMT) – A special tax designed primarily to prevent the wealthy from using so many legal tax breaks that their regular tax bill is reduced to little or nothing. In recent years, it has hit more and more taxpayers who live in high-tax states, have many children or exercise incentive stock options and will increasingly hit taxpayers who do not consider themselves rich. The AMT ignores certain tax benefits allowed by the regular rules and applies special rates—26 percent and 28 percent—to a larger amount of income than is hit by the regular tax.

Amended return – A revised tax return, filed on Form 1040X, to correct an error on a return filed during the previous three years. An amended return can result in owing extra tax or getting a refund, depending on the mistake you correct.

Audit – As if you didn’t know, this is a review of your tax return by the IRS, during which you are asked to prove that you have correctly reported your income and deductions. Most audits are done by mail and involve specific issues, not the entire return.