The income statement, also known as a profit and loss account, is a financial document that provides a summary of a company's revenues, expenses, and profits/losses over a specific period. Under both International Accounting Standards (IAS) and the Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102), the income statement plays a pivotal role in financial reporting.
An income stream refers to the regular flow of money generated by a business or investment, essential for evaluating financial health and planning future strategies.
Income tax is a tax imposed by governments on individuals and businesses based on their earnings within a fiscal year. Understanding income tax is essential for compliance and financial planning.
A direct tax on an individual’s income, generally levied at progressive rates, with income classified under various headings as per UK tax legislation.
Income tax allowances are amounts that may be deducted from a taxpayer's gross income before calculating the liability to income tax. These allowances can significantly reduce the amount of tax an individual or couple is required to pay.
Income tax code is a code number issued by HM Revenue and Customs (HMRC) which takes account of the personal allowance and any other additional allowances. It is used by employers through the PAYE scheme to calculate the taxable pay, ensuring the tax due for the fiscal year is deducted from the employee's earnings in equal weekly or monthly amounts.
An Income Tax Lien is a legal claim imposed by a government entity against a noncompliant taxpayer's property due to unpaid income taxes. This lien can pertain to both real and personal property.
An income tax preparer is a professional who prepares for compensation, or who employs or engages one or more persons to prepare for compensation, all or a substantial portion of any income tax return under the tax laws or any claim for refund of income tax.
The 2008 Income Tax Rebate Plan was a significant part of the $168 billion economic stimulus bill proposed by President George W. Bush. It provided tax relief to individuals and couples, raised loan limits for housing agencies, and offered incentive deductions for businesses.
An Income Tax Return (ITR) is a form filed with a tax authority that reports income, expenses, and other relevant financial information. Tax returns are used by individuals and businesses to calculate their tax liability, schedule tax payments, or request refunds for the overpayment of taxes.
Income tax schedules refer to detailed tables that list the tax rates or tax brackets applicable to various ranges of income levels. These schedules are used to determine the amount of tax payable by individuals and corporations.
An income-generating unit (IGU) is a distinct segment within a business or an investment that is capable of generating revenue independently. Understanding IGUs is crucial for effective financial reporting and valuation.
Government effort to control wages, prices, and costs by imposing wage and price controls, typically in response to unacceptable levels of inflation.
In the context of law, an incompetent individual is one who is not legally capable of completing a contract. This includes the mentally ill, minors, and others considered incapable. In a personal context, incompetence refers to an individual who is poorly suited to perform the required work.
Incomplete records in accounting refer to situations where some details are missing, such as unrecorded or partially recorded transactions. Completing these records usually involves examining the cash book and deducing missing items.
An incontestable clause is a provision in an insurance policy that prevents the insurer from voiding coverage due to fraud or misstatement by the insured after a specified period.
An incontestable clause is a provision within a life insurance policy that prevents the insurer from voiding the policy after a specified period, usually two years, due to misrepresentation or concealment by the insured.
Inconvertible money is a type of currency that cannot be exchanged for precious metals or other commodities that generally serve as backing for money. Examples include Federal Reserve notes in the United States.
Incorporating refers to the process of legally forming a new corporation, city, or including additional elements within an entity as per legal procedures.
An incorporated company results in a legal entity that is distinct from its owners, providing limited liability protection and other benefits.
Incorporation is the process by which a company is officially registered and recognized as a legal entity separate from its owners, allowing it to own assets, incur liabilities, and engage in contracts.
Incorporation of audit firms involves the formation of a limited company by a partnership to limit its liability against claims for negligence, offering essential protection while maintaining legal compliance under the Companies Act.
Incorporeal property refers to legal interests in real property that do not include the right of possession. Examples include easements and licenses, which grant specific, limited rights without conferring ownership or possession of the land.
International Commercial Terms, or Incoterms, first published in 1936 by the International Chamber of Commerce to promote standardized terminology for international trade.
Increasing costs refer to the scenario in an industry or firm where unit costs escalate as the quantity of output rises. This may be due to factors such as the need for more resources, inefficiencies, or production bottlenecks.
A characteristic of a production process that becomes more efficient at larger levels of output. The marginal cost of producing each additional unit decreases, often due to high fixed costs relative to marginal costs.
Incremental analysis, also known as differential analysis, is a decision-making tool used in business and accounting to assess the financial implications of different choices by focusing on relevant revenues and costs.
An incremental budget is prepared using a previous period's budget or actual performance as a basis, with incremental amounts added for the new budget period. It often fails to account for changed operating conditions.
An in-depth look at incremental cash flow, its significance in differential analysis, how it impacts decision-making, and real-life applications.
The overall cost of raising additional finance, reflecting the increased risks and required returns for equity and debt funders due to increased financing.
Incremental spending refers to budget allocation that allows for increased or decreased spending on media for advertising in direct proportion to sales. The challenge with this method is the difficulty in linking budget size to advertising objectives, making it hard to evaluate advertising success or failure in relation to expenditure.
A facility that provides small entrepreneurial businesses with affordable space, shared support, and business development services such as financing, marketing, and management. Incubators play an important role in helping young businesses survive and grow during the startup period, when they are most financially vulnerable.
In real estate appraisal, incurable depreciation occurs when the cost to correct a defect exceeds the benefit gained from the repair, making it uneconomical to spend on the repair.
Indemnity is a legal agreement whereby one party agrees to compensate another for any losses or damages that have occurred or might occur in the future. In the context of insurance, it involves securing against potential financial liabilities.
Indemnity refers to the obligation to compensate an individual for loss or damage endured or anticipated. It involves a legal commitment whereby one party agrees to cover the financial consequences caused to another.
An indenture is a formal agreement, also known as a deed of trust, between an issuer of bonds and the bondholder which outlines key considerations such as the form of bond, amount of issue, property pledged, protective covenants, working capital requirements, and redemption rights.
Independence in accounting is a state of having no bias, neutrality, and being objective regarding the client or another party while executing the audit function. This ensures the integrity and objectivity of the audit process.
The foundational element ensuring that auditors maintain their integrity and provide objective professional and business judgments in their work. Specific threats to this independence are extensive and regulated by both legislation and professional bodies.
An independent adjuster is an independent contractor who assesses and resolves insurance claims for various insurance companies. These professionals provide essential services for companies that either lack sufficient financial resources or have a claims volume that doesn't justify full-time, in-house adjusters.
An independent contractor is a self-employed individual who offers services to clients while maintaining complete control over how those services are provided. They handle their own taxes and benefits, and are not classified as employees of the payor.
An independent director, also known as an outside director, is a member of a company's board of directors who does not have a material or financial relationship with the company or related entities, apart from receiving a director's fee, and does not own shares in the company. Independent directors are considered better suited to provide impartial judgment and governance.
Independent events are two or more events whose occurrences do not affect one another. Understanding the independence of events is crucial in probability theory and statistics.
An Independent Financial Adviser (IFA) is a professional who offers unbiased financial advice to clients and recommends suitable financial products from a wide range of providers.
An independent financial adviser (IFA) is a person or firm licensed under the Financial Services Act to provide unbiased advice on a range of financial products, including pensions, investments, and life assurance. They are distinguished by their lack of commitment to any particular financial institution, ensuring they offer 'best advice' from the entire market.
An independent producer is a taxpayer who produces oil for the market without owning a pipeline system or refinery. These producers often benefit from a 15% percentage depletion rate.
Projects that are independent of each other in a comparative appraisal and are not mutually exclusive, allowing for the possibility of pursuing all given favorable circumstances.
An independent store refers to individually owned and operated retail shops that may not be part of larger retail chains. This term is often used in retail indexes and classifications for market research.
Independent taxation is a system of personal taxation in which married women are treated as completely separate and independent taxpayers for both income tax and capital gains tax.
An independent union is a labor union that is not affiliated with the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO).
Two or more variables that are in no way associated with or dependent on each other.
An index is a statistical compilation that puts a current economic or financial condition into context, often by relating it to a base period or another time frame. It is used to measure economic trends over time and can influence adjustments in sectors like wages, rentals, loans, and pensions.
A comparative calculation that defines the relationship between two or more values by calling one value the standard with a value of 100 and all other values some percent over or under the base standard of 100.
An index fund is a type of mutual fund designed to replicate the performance of a specific market index, such as the Standard & Poor's 500 Index (S&P 500). These funds aim to match the returns of the chosen index by holding identical proportions of the underlying assets.
An index lease is a rental agreement that mandates adjustments in rent based on a published record of cost changes, typically tied to an economic indicator like the Consumer Price Index (CPI).
An index of leading indicators is a composite index comprised of various economic indicators that are used to predict the future direction of the economy.
Explore index options, which are calls and puts on indexes of stocks, allowing investors to trade in a particular market or industry group without purchasing individual stocks.
Index-linked gilt refers to a type of government bond issued by the UK in which both the interest payments and the redemption value are adjusted in line with inflation, as measured by the Retail Price Index (RPI).
Indexation is the practice of adjusting the chargeable gain from the sale of an asset to take account of inflation over the period of ownership, and the policy of connecting economic variables like wages, taxes, and pensions to rises in the general price level.
Indexed life insurance is a type of policy whose face value varies according to a prescribed index of prices, providing a death benefit that adjusts based on indices like the Consumer Price Index (CPI).
A long-term loan in which the term, payment, interest rate, or principal amount may be adjusted periodically according to a specific index.
Indexing refers to the method of adjusting various economic interests—such as wages, taxes, and investment portfolios—based on the performance of a specific index, like the S&P 500 or the Consumer Price Index (CPI).
An indicative quote is a price provided to a client as a guide to current market prices. It is not a firm offer to buy or sell at the quoted price.
An indifference curve is a graphical representation that shows different combinations of two goods providing equal utility or satisfaction to a consumer.
An indifference map is a graphical representation of multiple indifference curves, each depicting sets of combinations of goods that offer incrementally higher levels of satisfaction to a consumer.
In manufacturing, an indirect cost refers to expenses that cannot be directly attributed to specific products. Examples include electricity, hazard insurance on the factory building, and real estate taxes.
An indirect cost centre refers to a division or department within an organization that incurs costs but does not directly generate revenue. These centres typically support the production of goods or services.
Indirect costs, also known as indirect expenses, are expenses that cannot be traced directly to a product or cost unit and are therefore considered overheads.
Wages and related costs of factory employees, such as inspectors and maintenance crews, whose time is not charged to specific finished products; sometimes combined with indirect materials costs, such as supplies, to derive indirect costs.
Personnel not directly engaged in the production of a product or cost unit manufactured by an organization. Examples of indirect labour include maintenance personnel, cleaning staff, and senior supervisors, such as foremen.
Indirect labour costs are the wages, bonuses, and other forms of remuneration paid to employees whose work does not directly contribute to the production of goods or services but supports the overall operations of a business.
Indirect manufacturing costs, also referred to as factory overhead, are expenses that cannot be directly tied to a specific product or production process. These costs include maintenance, utilities, and depreciation of manufacturing equipment.
Indirect materials are those materials that do not feature in the final product but are necessary to carry out the production process. Examples include machine oil, cleaning materials, and consumable materials.
Indirect materials cost refers to the expenses incurred in providing materials that are not directly traceable to a specific product or job but are necessary for the manufacturing process.
The method used for a cash-flow statement in which the operating profit is adjusted for non-cash charges and credits to reconcile it with the net cash flow from operating activities.
Indirect overhead refers specifically to overhead costs that cannot be directly attributed to the production of a specific product but are necessary for the overall operation of the business.
Indirect production refers to the creation of goods or services that are not directly consumed but are essential for the production of final products or services.
An indirect shareholder owns shares through an intermediary or another entity rather than holding shares directly under their own name. This often occurs in scenarios involving nominee shareholding, where the shares are held by a nominee on behalf of the actual investor.
Indirect taxes encompass a range of levies imposed on goods and services rather than income or profits, ultimately paid by consumers through higher prices.
Individual bargaining refers to negotiations between a single employee and their employer, often giving the employer greater strength compared to collective bargaining where the employer negotiates with a group of employees.
Individual life insurance provides coverage for a single life, as opposed to group life insurance, which covers multiple lives collectively. This type of insurance offers personalized policies tailored to the specific needs and circumstances of the individual.
An Individual Retirement Account (IRA) is a trust fund designed for individual employees to save for retirement with tax advantages. Contributions, limits, and tax benefits all depend on various conditions such as income level and participation in other qualified plans.
An Individual Retirement Account (IRA) is a retirement savings account that provides tax advantages for retirement savings in the United States. It is designed to help individuals set aside funds for their retirement.
A provision of the IRA law enabling persons receiving lump-sum payments from their company's pension or profit-sharing plan due to retirement or other termination of employment to roll the amount over, tax-free, into an IRA investment plan within 60 days.
A tax-advantaged savings account available in the UK that allows individuals to save or invest a certain amount per year without paying personal income tax or capital gains tax on the earnings.
An Individual Voluntary Arrangement (IVA) is a formal, legally-binding agreement between an individual and their creditors to pay off debts over a set period, usually managed by an insolvency practitioner.
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between a person and their creditors to pay off their debts over a specified period, often with reduced payments.
Individualism is a philosophy or quality characterized by the tendency of a manager or employee to make decisions and perform tasks in their own way or style. Encouraging individualism can lead to enhanced creativity and motivation but also requires a balance to ensure corporate goals and policies are upheld.
Inductive reasoning is a process where specific observations or experiences are used to make generalized conclusions. Commonly used in fields such as science, marketing, and business strategy, inductive reasoning involves deriving patterns or theories from specific instances.
Industrial advertising focuses on promoting products and services used by commercial business customers in the production or distribution of other goods and services. This niche sector is vital for businesses that deal in raw materials, components, or equipment.
Industrial classification segments companies that engage in the production and distribution of goods and services, excluding utilities, transportation, and financial services.
Refers to a user of industrial products, though the correct term should be 'industrial customer'. The term 'industrial consumer' is utilized informally within the industry to differentiate this user type from other product users.
An Industrial Development Board (IDB) is a governmental or quasi-governmental entity established to promote and support economic development within a specific jurisdiction. Its primary role is to attract, retain, and expand businesses and industries to enhance the local economy, create jobs, and improve the quality of life for residents.
A debt instrument issued by a municipality to finance assets, which are then leased to private industrial businesses to promote local economic development.
Industrial Development Bonds (IDBs) are debt obligations issued by state or local governments for funding the capital investments in the trade or business operations of nonexempt persons.
An industrial distributor is a wholesaler who sells products to industrial customers rather than to retailers, providing a vital link in the supply chain.
An industrial engineer studies industrial productivity and implements recommended changes to optimize integrated systems comprising workers, materials, and equipment. This involves applying mathematical, physical, and social sciences combined with engineering principles and methods to improve system efficiency and productivity.
Industrial fatigue refers to employee burnout characterized by physical or emotional exhaustion, resulting in lowered job productivity and performance. Factors like understaffing, unpleasant surroundings, and high pressure can contribute to this condition.
Products or services purchased for use in the production of other goods or services, in the operation of a business, or for resale to other consumers. Industrial products include heavy machinery, raw materials, tools, and computer equipment.
An industrial park is a designated area zoned specifically for manufacturing and related activities, often complete with necessary infrastructure to support industrial operations.
Monthly statistic released by the Federal Reserve Board (FRB) on the total output of all U.S. factories and mines. These numbers are a key economic indicator.
