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Financial & Accounting Terms Everyone Should Know
At Bloch Rothman & Associates, LTD in Denver, Colorado, we often recieve questions on commonly-used financial and accounting terms and what they mean when it comes to your taxes, bookkeeping, and finances. We wanted to take this time to pinpoint a few of these terms and their exact definition to better assist you when it comes to managing your money.
Amortization - Process of paying off debt in regular installments over a fixed period of time.
AGI - Adjusted Gross Income. Gross income minus deductions. This is used to calculate your taxable income on Form 1040 when preparing your taxes.
Bonds - Also known as fixed-income securities. Bonds are basically intestments in debt - you are lending money to an entity (usually the government or a corporation) for a period of time at a fixed interest rate. You receive the interest payments over time and get the loaned amount back at the maturity date of the bond.
Dependent - An individual who is financially dependent on your income, which you can receive a tax credit or exemption for.
FICO Score - This is used by banks and lenders to measure your credit worthiness. The acronym stands for Fair Isaac Corporation. Scores can range from 300-850.
Net Worth - This is the difference between your assets and liabilities.
Stock Options - A benefit to employees that gives them the option to buy their employer's stock at a preset price. This is often used as a management incentive.
Standard Deduction - An amount based upon your tax filing status that is determined by the government and is used to reduce your taxable income if you decide not to itemize your deductions.