E
| Term | Meaning |
|---|---|
| Earned income | Wages, salaries, professional fees, and other amounts received as compensation for services rendered. |
| Earned income tax credit (EITC) | A refundable tax credit for eligible low-income workers, subject to computations based on qualifying children and phase-in and phase-out income levels. |
| Earnings per share (EPS) | Measure of performance calculated by dividing the net earnings of a company by the average number of shares outstanding during a period. |
| Earnings price ratio | Relationship of earnings per share (EPS) to the current stock price. |
| Econometrics | Use of computer analysis and modeling techniques to describe in mathematical terms the relationship between key economic forces such as labor, capital, interest rates, and government policies, and to test the effects of changes in economic scenarios. |
| Economic growth rate | Rate of change in the gross national product, expressed in an annual percentage. |
| Economics | The study of the ways goods and services are produced, transported, sold, and used. |
| Effective interest method | A way of amortizing bond discounts or premiums by applying a constant interest rate to the carrying value of the bonds at the beginning of each interest period. |
| Effective interest rate | The rate of interest actually paid or earned. |
| Effective tax rate | Total income taxes expressed as a percentage of net income before taxes. |
| EITC | A refundable tax credit for eligible low-income workers, subject to computations based on qualifying children and phase-in and phase-out income levels. |
| EITF | Assists the Financial Accounting Standards Board (FASB) and provides guidance on the early identification of emerging issues affecting financial reporting and problems in implementing authoritative pronouncements. |
| Emerging issues task force (EITF) | Assists the Financial Accounting Standards Board (FASB) and provides guidance on the early identification of emerging issues affecting financial reporting and problems in implementing authoritative pronouncements. |
| Employee stock ownership plan (ESOP) | Stock bonus plan of an employer that acquires securities issued by the plan sponsor. |
| Encumbrance | (1) Mortgage or other lien on the entity’s assets; (2) anticipated expenditure; (3) uncompleted or undelivered portion of a purchase commitment. |
| Ending inventory | Merchandise on hand at the end of an accounting period. |
| Endorsement | The process by which the payee transfers ownership of a check to a bank or another party by writing his or her name on the back of it. |
| Engagement completion document | A document whereby the auditor identifies all significant findings or issues. The document should be as specific as necessary in the circumstances for a reviewer to gain a thorough understanding of the significant findings or issues. |
| Entrepreneur | A person who takes on the risks of starting a new business. |
| EPS | Measure of performance calculated by dividing the net earnings of a company by the average number of shares outstanding during a period. |
| Equilibrium price | Price when the supply of goods in a particular market matches demand. |
| Equity | Residual interest in the assets of an entity that remains after deducting its liabilities. Also, the amount of a business’ total assets less total liabilities. Also, the third section of a balance sheet, with the other two being assets and liabilities. |
| Equity account | Account in the equity section of the balance sheet. Includes capital stock, additional paid-in capital, and retained earnings. |
| Equity financing | Raising money by issuing shares of common stock or preferred stock. |
| Equity Method of Accounting | Investor’s cost basis is adjusted up or down (in proportion to the % of stock ownership) as the investee’s retained earnings fluctuation; used for long-term investments in equity securities of an affiliate where the holder can exert significant influence; 20% ownership or greater is arbitrarily presumed to have significant influence over the investee. |
| Equity securities | Capital stock and other securities that represent ownership shares, or the legal rights to purchase or acquire capital stock. |
| Error | An act that departs from what should be done; imprudent deviation, unintentional mistake, or omission. |
| Escrow | Money or property put into the custody of a third party for delivery to a grantee, only after fulfillment of specified conditions. |
| ESOP | Stock bonus plan of an employer that acquires securities issued by the plan sponsor. |
| Estate tax | Tax on the value of a decedent’s taxable estate, typically defined as the decedent’s assets less liabilities and certain expenses which may include funeral and administrative expenses. |
| Estimated tax | Amount of tax liability a taxpayer may expect to pay for the current tax period. Usually paid through quarterly installments. |
| Estimation transactions | Activities that involve management judgments or assumptions in formulating account balances in the absence of a precise means of measurement. |
| Evidential matter | Underlying accounting data and other corroborating information that support the financial statements. |
| Exchanges | Transfer of money, property, or services in exchange for any combination of these items. |
| Excise tax | Tax or duty on the manufacture, sale, or consumption of commodities. |
| Exclusions | Income item excluded from a taxpayer’s gross income by the Internal Revenue Code or an administrative action. Common exclusions include gifts, inheritances, and death proceeds paid under a life insurance contract. Also known as excluded income. |
| Executor | Person appointed by a will to manage a decedent’s estate. |
| Exempt organization | Organization generally exempt from paying federal income tax. Exempt organizations include religious organizations, charitable organizations, social clubs, and others. |
| Exemption | Amount of a taxpayer’s income that is not subject to tax. All individuals, trusts, and estates qualify for an exemption unless they are claimed as a dependent on another individual’s tax return. Exemptions also are granted to taxpayers for their dependents. |
| Expatriation tax | Individuals that lose or terminate their residency within the 10-year period immediately preceding the close of a tax year, if the termination or loss is for the sole purpose of avoiding tax. |
| Expectation GAP | The difference in perception between the public and the CPA as a result of accounting and audit service. |
| Expenditure | Payment, either in cash, by assuming a liability, or by surrendering an asset. |
| Expense | Something spent on a specific item or for a particular purpose. |
| Expense ratio | Amount, expressed as a percentage of total investment, that shareholders pay for mutual fund operating expenses and management fees. |
| Experienced auditor | An auditor that has a reasonable understanding of audit activities and has studied the company’s industry as well as the accounting and auditing issues relevant to the industry. |
| Exploration expenditures | An auditor that has a reasonable understanding of audit activities and has studied the company’s industry as well as the accounting and auditing issues relevant to the industry. |
| Exposure draft | Document issued by the American Institute of Certified Public Accountants (AICPA), Financial Accounting Standards Board (FASB), Governmental Accounting Standards Board (GASB), or other standards-setting authorities to invite public comment before a final pronouncement is issued. |
| Extension | Time granted by a taxing authority, such as the Internal Revenue Service (IRS), a state, or city, which allows the taxpayer to file tax returns later than the original due date. It is this date that if most files timely may result in a penalty, fine, and commence interest charges. |
| Extent of Tests of Control | Each year the auditor must obtain sufficient evidence about whether the company’s internal control over financial reporting, including the controls for all internal control components, is operating effectively. |
| External reporting | Reporting to stockholders and the public, as opposed to internal reporting for management’s benefit. |
| Extinguishment of Debt | To get rid of the liability by payment; to bring to an end. |
| Extraordinary items | Events and transactions distinguished by their unusual nature and by the infrequency of their occurrence. Extraordinary items are reported separately, less applicable income taxes, in the entity’s statement of income or operations. |