An advance refers to a payment on account or a loan. It is particularly relevant in a partnership context, referring to amounts paid into the partnership that exceed agreed capital contributions. Under the Partnership Act 1890, such advances collect interest unless otherwise agreed by the partners. On dissolution, advances are repaid after external creditors but before the distribution of remaining capital to the partners.
Amortization refers to the process of spreading out a loan into a series of fixed payments over a specified period of time. Each payment covers both principal and interest, resulting in the gradual reduction of the loan balance.
An amortization schedule details the specific payments required to repay a loan, providing clarity on the principal and interest components of each payment over the entire term of the loan.
A bank deposit is a sum of money placed by a customer with a bank, which may attract interest and have specific accessibility terms. Deposits allow banks to extend loans to other customers, existing mainly on paper in the bank's books.
A carrying charge is a fee associated with holding an investment or conducting business that includes costs such as interest, storage, and insurance across various sectors like commodities, real estate, retailing, and securities.
The compound amount of one refers to the value that $1 would grow to if it is left on deposit with interest allowed to compound over a period of time.
Debt is an amount of money borrowed by one party from another, which is often incurred by businesses and individuals to finance specific activities or projects.
A direct-reduction mortgage is a type of loan that requires both interest and principal to be paid with each installment, ensuring the loan is fully amortized by the end of its term.
An Early Repayment Tax Clause is a provision in a loan agreement that allows the borrower to repay the loan early if changes in relevant tax legislation increase the amount of interest payable.
The terms 'X' and 'XD' are symbols used in newspapers and financial reports to signify that a stock or bond is trading without its respective dividend or interest.
Factors of production refer to the resources required to produce economic goods, including land, labor, capital, and entrepreneurial ability. Each factor has an associated cost: rent for land, wages for labor, interest for capital, and profit for the entrepreneur.
A finance charge is a fee imposed for the privilege of deferring payment of a debt or for borrowing funds. It is commonly used in credit card transactions and loans.
U.S. tax form used by payers to report various types of income other than wages, salaries, and tips. Examples include interest, dividends, royalties, capital gains, and miscellaneous income.
Interest is the charge applied for borrowing a sum of money, typically expressed as a percentage of the principal loan amount. Interest calculations can vary based on whether simple or compound interest is used, influencing financial decisions significantly.
Investment income refers to the earnings generated from various types of investments, including dividends, interest, and gains made from the sale of investment properties.
A junior issue refers to a type of debt or equity that is subordinate in claim to another issue, particularly in terms of dividends, interest, principal, or security in the event of liquidation.
A legal right is an interest that the law will protect. It is a privilege or entitlement granted by a legal system to individuals or entities, allowing them to perform certain actions or be free from others performing certain actions against them.
An individual or firm that extends money to a borrower with the expectation of being repaid, usually with interest, creating debt in the form of loans. Lenders are paid off before stockholders in the event of corporate liquidation.
A grant of permission or privilege, whether by private individuals or governmental authority, that legalizes the performance of specific activities. In property law, a license is a personal, revocable privilege concerning land use.
A loan is a financial transaction where a lender provides property, typically money, to a borrower, who promises to return the property with interest after a specified period.
Nonbusiness income refers to earnings derived from passive sources such as interest, dividends, and nonbusiness capital gains, primarily used in taxation to calculate the net operating loss deduction. It includes income from investment assets separate from apportionment in multistate corporations.
Principal and Interest (P&I) refers to the two main components of a loan payment. The principal repayment decreases the loan balance, while the interest is the cost of borrowing the money.
Passive investment income refers to the earnings derived from investments in which the individual or entity does not actively participate. This includes royalties, rents, dividends, interest, annuities, and gains from the sale of stocks and securities.
A banking loan on which the interest is more than 90 days overdue. After this grace period has elapsed, the borrower becomes liable for late charges.
PITI is an acronym representing the four primary components that make up a borrower's monthly mortgage payments: Principal, Interest, Taxes, and Insurance. Understanding PITI is crucial for both lenders and borrowers to ensure accurate financial planning and loan repayment.
Portfolio income in taxation includes interest, dividends, royalties, and gains and losses from investments. It distinguishes between passive, active, and portfolio income, indicating that passive activity losses may not be offset against active or portfolio income.
The term 'principal' in accounting can refer to either the initial sum of money on which interest is paid or to a person who has authorized another to act on their behalf, especially in the context of an agency relationship.
The principal amount is the face value of a financial obligation such as a bond or a loan that is required to be repaid at its maturity date, distinct from the interest accrued.
The principal sum refers to the core amount of a debt or financial obligation. In finance, it is the initial amount of money borrowed without interest. In insurance, it designates the amount specified to be paid to the beneficiary under the policy, such as the death benefit.
The rate of interest represents the cost of borrowing money expressed as a percentage of the principal amount. It is a fundamental concept in both personal and corporate finance, impacting loans, savings, investment decisions and the overall economy.
A Regulated Investment Company (RIC), such as a mutual fund or Real Estate Investment Trust (REIT), is eligible under Regulation M of the Internal Revenue Service to pass capital gains, dividends, and interest earned on fund investments directly to its shareholders to be taxed at the personal level, thereby avoiding double taxation on corporations and stockholders.
A tax-deductible expense can be used to reduce taxable income, resulting in a lower tax liability. Common examples include interest on housing, ad valorem taxes, depreciation, repairs, maintenance, utilities, and other ordinary and necessary business expenses.
An unearned discount is an account on the books of a lending institution that recognizes interest deducted in advance from a loan. This interest will be taken into income as earned over the life of the loan.
Unearned income refers to income that is not derived from active work, such as wages, salaries, or professional fees, but from investments, savings, or other passive sources like dividends, interest, and rental income.
