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

Accounting Terms-D

debentures
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.

debt
Money owed.

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

decedent
Legal term for a person who has died.

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.

default
To fail to pay back a loan or meet an obligation.

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

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

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 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.

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 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.

deposit
Money entered in a bank account.

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.

depreciation
The decline in value of an asset. Also, the allocation of an asset’s cost as expense over the life of the asset.

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.

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.

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.

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.

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.

drawee
The bank on which a check is drawn.

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.

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.

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.

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