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Transcript
Money
Vocabulary
Credit
The ability of a customer to obtain goods or services before payment, based on the trust that
payment will be made in the future. An entry recording a sum received, listed on the right-hand
side or column of an account.
A contractual agreement in which a borrower receives something of value now and agrees to repay
the lender at some date in the future, generally with interest. The term also refers to the borrowing
capacity of an individual or company.
Debit
An accounting entry that results in either an increase in assets or a decrease in liabilities on a
company's balance sheet or in your bank account. A debit on an accounting entry will have
opposite effects on the balance depending on whether it is done to assets or liabilities, with a debit
to assets indicating an increase and vice versa for liabilities.
(of a bank or other financial organization) remove (an amount of money) from a customer's
account, typically as payment for services or goods.
Interest
Interest is the charge for the privilege of borrowing money, typically expressed as annual
percentage rate. Interest can also refer to the amount of ownership a stockholder has in a
company, usually expressed as a percentage.
There are two main types of interest that can be applied to loans: simple and compound. Simple
interest is a set rate on the principle originally lent to the borrower that the borrower has to pay for
the ability to use the money. Compound interest is interest on both the principle and the
compounding interest paid on that loan. The latter of the two types of interest is the most
common.
Gross Pay
Gross pay (uncountable) An amount of pay, wages, salary, or other compensation before
deductions, such as for taxes, insurance, and retirement.
Gross pay, often called gross wages, is the total compensation earned by each employee. Notice I
didn’t say it was the total amount paid to each employee. Gross pay typically consists wages,
salaries, commissions, bonuses, and any other type of earnings before taxes and
related deductions are taken out of it.
Net Pay
Net pay is the amount of wages that employees actually take home. In other words, net pay is the
amount of money on each employee paycheck. Employers deduct many different amounts from
employee wages every pay period.
The money that an individual actually receives from working after employment taxes and the cost
of benefits and retirement contributions are subtracted. Take-home pay is calculated by taking an
individual's monthly gross income and subtracting federal income tax, Social Security and Medicare
taxes, any state or local income taxes, monthly health and dental insurance premiums, 401(k)
contribution and contributions to a flexible spending account. The money that remains is what an
employee actually has available for expenses like paying the mortgage, buying groceries and paying
for discretionary purchases.
Fixed Expenses
Fixed expenses or costs are those that do not fluctuate with changes in production level or sales
volume. They include such expenses as rent, insurance, dues and subscriptions, equipment leases,
payments on loans, depreciation, management salaries, and advertising.
A cost that does not change with an increase or decrease in the amount of goods or services
produced. Fixed costs are expenses that have to be paid by a company, independent of any
business activity. It is one of the two components of the total cost of a good or service, along
with variable cost.
Variable Expenses
Variable costs are those costs that vary depending on a company's production volume; they rise as
production increases and fall as production decreases. Variable costs differ from fixed costs such as
rent, advertising, insurance and office supplies, which tend to remain the same regardless of
production output.
A corporate expense that varies with production output. Variable costs are those costs that vary
depending on a company's production volume; they rise as production increases and fall as
production decreases. Variable costs differ from fixed costs such as rent, advertising, insurance and
office supplies, which tend to remain the same regardless of production output. Fixed costs and
variable costs comprise total cost.
Consumable Goods
Consumables (also known as consumable goods, nondurable goods, or soft goods)
are goods that, according to the 1913 edition of Webster's Dictionary, are capable of being
consumed; that may be destroyed, dissipated, wasted, or spent.
Goods used by individuals and businesses that must be replaced regularly because they wear out
or are used up. Consumables can also be defined as the components of an end product that are
used up or permanently altered in the process of manufacturing, such as semiconductor wafers
and basic chemicals.
Durable Goods
Goods not for immediate consumption and able to be kept for a period of time.
A category of consumer goods, durables are products that do not have to be purchased frequently.
Some examples of durables are appliances, home and office furnishings, lawn and garden
equipment, consumer electronics, toy makers, small tool manufacturers, sporting goods,
photographic equipment, and jewelry.
FICA
Federal Insurance Contributions Act (FICA) tax /ˈfaɪkə/ is a United States federal payroll (or
employment) tax imposed on both employees and employers to fund Social Security and
Medicare—federal programs that provide benefits for retirees, the disabled, and children of
deceased workers.
A U.S. law requiring a deduction from paychecks and income that goes toward the Social Security
program and Medicare. Both employees and employers are responsible for sharing the FICA
payments.
Salary
A fixed regular payment, typically paid on a monthly or biweekly basis but often expressed as an
annual sum, made by an employer to an employee, especially a professional or white-collar
worker.
A salary is a form of periodic payment from an employer to an employee, which may be specified
in an employment contract. It is contrasted with piece wages, where each job, hour or other unit
is paid separately, rather than on a periodic basis. From the point of view of running a business,
salary can also be viewed as the cost of acquiring and retaining human resources for running
operations, and is then termed personnel expense or salary expense. In accounting, salaries are
recorded in payroll accounts.
Discretionary expenses
A discretionary expense is a cost which is not essential for the operation of a home or a business.
For example, a business may allow employees to charge certain meal and entertainment costs to
the company in order to promote goodwill with employees.
A discretionary expense is a cost which is not essential for the operation of a home or a business.
For example, a business may allow employees to charge certain meal and entertainment costs to
the company in order to promote goodwill with employees. In the home,
discretionary expenses are most often defined as things which are "wants" rather than "needs".
Budget
An estimate of income and expenditure for a set period of time. A quantity of material, typically
that which is written or printed.
An estimation of the revenue and expenses over a specified future period of time. A budget can
be made for a person, family, group of people, business, government, country, multinational
organization or just about anything else that makes and spends money. A budget is a
microeconomic concept that shows the tradeoff made when one good is exchanged for another.
Credit Score
A number assigned to a person that indicates to lenders their capacity to repay a loan.
A statistically derived numeric expression of a person's creditworthiness that is used by lenders to
access the likelihood that a person will repay his or her debts. A credit score is based on, among
other things, a person's past credit history. It is a number between 300 and 850 - the higher the
number, the more creditworthy the person is deemed to be.
Financial Institution
DEFINITION of 'Financial Institution - FI' An establishment that focuses on dealing with financial
transactions, such as investments, loans and deposits. Conventionally, financial institutions are
composed of organizations such as banks, trust companies, insurance companies and investment
dealers.
An establishment that focuses on dealing with financial transactions, such as investments, loans
and deposits. Conventionally, financial institutions are composed of organizations such as banks,
trust companies, insurance companies and investment dealers. Almost everyone has deal with a
financial institution on a regular basis. Everything from depositing money to taking out loans and
exchange currencies must be done through financial institutions.
Mortgage
the charging of real (or personal) property by a debtor to a creditor as security for a debt
(especially one incurred by the purchase of the property), on the condition that it shall be
returned on payment of the debt within a certain period.
A debt instrument, secured by the collateral of specified real estate property, that the borrower is
obliged to pay back with a predetermined set of payments. Mortgages are used by individuals
and businesses to make large real estate purchases without paying the entire value of the
purchase up front. Over a period of many years, the borrower repays the loan, plus interest, until
he/she eventually owns the property free and clear. Mortgages are also known as "liens against
property" or "claims on property." If the borrower stops paying the mortgage, the bank can
foreclose.