Seattle & Redmond, WA Tax, Accounting, QuickBooks, Business Consulting: Stephen L. Nelson, CPA

Accounting Terms-B

balance of payments
The total payments of the businesses, people, and government of one country, less the total payments made by all other countries. A country with a favorable balance of payments receives more money than it pays out to other countries.

balance of trade
The difference between the amount of goods a country imports and exports. If a country imports more than it exports, it has a negative balance of trade. If it exports more, it has a favorable balance.

bank discount rate
The rate that banks charge customers for the use of banker’s acceptances and other financial instruments.

bank draft
A check written by a bank that draws on funds that the bank holds in another bank. For example, if a customer in Las Vegas needed funds immediately, a bank in Boston might issue a bank draft on its account in Las Vegas so that the customer could get the money more quickly. Banks charge for this service.

banker’s acceptance
A short-term credit instrument used by importers and exporters to speed international trade. The exporter sends a bill of exchange to a bank in the United States, which accepts the bill of exchange and agrees to pay it if the importer cannot pay.

bankruptcy
The legal procedure for deciding how to handle the debts of a business or individual who cannot meet credit obligations. If the debtor is declared insolvent, the property is put under the control of a trustee or receiver so it can be distributed to creditors.

base rate
For indexing purposes, the interest rate used to establish the price of bank loans. For example, many banks use the prime rate—the rate banks charge their most trustworthy customers for commercial loans—as the base rate for determining mortgage rates.

basis
The original cost of an asset, used to calculate capital gains and capital gains taxes.

basis point
0.01 percent, the smallest percentage point for quoting bond yields. If a bond yield changes from 6.00 to 6.85 percent, it has moved 85 basis points in yield.

bearer bond
A bond that belongs to the person who has it in hand. Bearer bonds are not registered to individuals or institutions. To receive payment, the bearer must present the bond. By contrast, owners of registered bonds are sent payments automatically when they fall due.

bearer instrument
A financial instrument, such as a bearer bond, payable to the person who possesses it. Bearer instruments are not registered to any party and do not need to be endorsed before payment is made.

beneficiaries
The people who benefit, or receive annuities, from a life insurance policy when the policyholder dies.

bequest
A gift of money or personal items made in a will.

beta
A measure of how volatile the price of an investment or stock is, as compared with the entire market. If the price changes dramatically, the investment has a “high beta.” If the price is stable, it has a “low beta.” The overall beta of the market, the way, equals 1.

board of directors
Advisors elected by stockholders to manage an incorporated company. The board of director’s job is to represent stockholder interests and oversee the company’s management. Even small firms owned and operated by a single person sometimes have boards because boards can often be wonderful sources of advice and information.

bond
An interest-bearing certificate of public or private indebtedness. Bonds pay a fixed interest rate and are redeemable after a certain time period.

bond, discount
A bond sold for less than the value its issuer promises to pay when the bond reaches maturity.

bond, fidelity or surety
Binding promises that “principal(s)” will perform certain acts to “obligee(s),” with the obligee(s) being paid sums of money if the principal(s) do not fulfill their obligations. Fidelity bonds pay employers in case their bonded employees prove to be dishonest. Surety bonds guarantee that the principal, often an employer, will fulfill certain duties.

bond issue
Bonds of the same type of class offered at the same time.

bond, premium
A bond sold for more than the value its issuer promises to pay when the bond reaches maturity.

bond prices
Prices quoted as percentages of their principle amount. For example, a $500 bond quoted at 95 would sell for $475. One quoted at 105 would sell for $525.

bond rating
A ranking system for assessing the financial solvency of bonds. AAA is the highest ranking. Bonds are ranked by Standard & Poor’s and Moody’s Investor’s Service, among others.

book value
The original value of an asset less the accumulated depreciation. The book value is the value of an asset on the balance sheet. The book value is different from the market value.

bridge loan
A short-term loan provided while long-term financing is being finalized. Homeowners who have purchased a new home but have yet to sell the old one can get a bridge loan to tide themselves over until the old home is sold and the proceeds from the old home arrive. Sometimes entrepreneurs buying businesses use bridge loans as a short-term source of funding, too.

bullet loan
A loan for which the principal is paid in one payment, in one lump sum. For example, a ten-year bullet loan would probably require regular interest payments but wouldn’t require any principal payments until the end of the ten years.

bullion
Uncoined gold or other precious metals in bars or ingots.

business plan
A plan explaining to loan officers how a new business or a business that is restructuring will use the loan money. See the “How to write a business plan” article for more information.

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