Audit – Financial Terms

An audit is a professional, independent examination of a company’s financial statements and accounting documents according to generally accepted accounting principles. An IRS audit, in contrast, is an examination of a taxpayer’s return, usually to question the accuracy or acceptability of the information the return reports.

Automatic enrollment – Financial Terms

Your employer has the right to sign you up for your company’s 401(k) plan, in what’s known as an automatic, involuntary, or negative enrollment. If you don’t want to participate, you must refuse, in writing, to be part of the plan. In an automatic enrollment, the company determines the percentage of earnings you contribute and […]

American Association of Individual Investors (AAII) – Financial Terms

The goal of this independent, nonprofit organization is teaching individual investors how to manage their assets effectively. Headquartered in Chicago, the AAII offers publications, seminars, educational programs, software and videos, and other services and products to its members. The AAII website (www.aaii.org) also provides a wide range of information about investing and personal finance.

Alternative minimum tax (AMT) – Financial Terms

The AMT was designed to ensure that all taxpayers pay at least the minimum federal income tax that is appropriate for their income level, no matter how many deductions or credits they are entitled to claim. Taxpayers may trigger the AMT if they deduct high state and local taxes or mortgage interest expenses, exercise a […]

Average daily balance – Financial Terms

The interest you owe on your credit card or earn on a saving account may be calculated using the average daily balance. When a credit card company uses this method, it divides the balance you owe each day by the number of days in your billing cycle and multiplies the result by the finance charge […]