Accounting or accountancy is the measurement and communication of financial information about economic entities such as businesses and corporations. The modern field was established by the Italian mathematician Luca Pacioli in 1494. Accounting, called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of users, including investors, creditors and regulators. Practitioners of accounting are known as accountants; the terms "accounting" and "financial reporting" are used as synonyms. Accounting can be divided into several fields including financial accounting, management accounting, external auditing, tax accounting and cost accounting. Accounting information systems are designed to support related activities. Financial accounting focuses on the reporting of an organization's financial information, including the preparation of financial statements, to the external users of the information, such as investors and suppliers.
The recording of financial transactions, so that summaries of the financials may be presented in financial reports, is known as bookkeeping, of which double-entry bookkeeping is the most common system. Accounting is facilitated by accounting organizations such as standard-setters, accounting firms and professional bodies. Financial statements are audited by accounting firms, are prepared in accordance with accepted accounting principles. GAAP is set by various standard-setting organizations such as the Financial Accounting Standards Board in the United States and the Financial Reporting Council in the United Kingdom; as of 2012, "all major economies" have plans to converge towards or adopt the International Financial Reporting Standards. The history of accounting is thousands of years old and can be traced to ancient civilizations; the early development of accounting dates back to ancient Mesopotamia, is related to developments in writing and money. By the time of Emperor Augustus, the Roman government had access to detailed financial information.
Double-entry bookkeeping was pioneered in the Jewish community of the early-medieval Middle East and was further refined in medieval Europe. With the development of joint-stock companies, accounting split into financial accounting and management accounting; the first work on a double-entry bookkeeping system was published by Luca Pacioli. Accounting began to transition into an organized profession in the nineteenth century, with local professional bodies in England merging to form the Institute of Chartered Accountants in England and Wales in 1880. Both the words accounting and accountancy were in use in Great Britain by the mid-1800s, are derived from the words accompting and accountantship used in the 18th century. In Middle English the verb "to account" had the form accounten, derived from the Old French word aconter, in turn related to the Vulgar Latin word computare, meaning "to reckon"; the base of computare is putare, which "variously meant to prune, to purify, to correct an account, hence, to count or calculate, as well as to think."The word "accountant" is derived from the French word compter, derived from the Italian and Latin word computare.
The word was written in English as "accomptant", but in process of time the word, always pronounced by dropping the "p", became changed both in pronunciation and in orthography to its present form. Accounting has variously been defined as the keeping or preparation of the financial records of an entity, the analysis and reporting of such records and "the principles and procedures of accounting". Accountancy refers to the occupation or profession of an accountant in British English. Accounting has several subfields or subject areas, including financial accounting, management accounting, auditing and accounting information systems. Financial accounting focuses on the reporting of an organization's financial information to external users of the information, such as investors, potential investors and creditors, it calculates and records business transactions and prepares financial statements for the external users in accordance with accepted accounting principles. GAAP, in turn, arises from the wide agreement between accounting theory and practice, change over time to meet the needs of decision-makers.
Financial accounting produces past-oriented reports—for example the financial statements prepared in 2006 reports on performance in 2005—on an annual or quarterly basis about the organization as a whole. This branch of accounting is studied as part of the board exams for qualifying as an actuary; these two types of professionals and actuaries, have created a culture of being archrivals. Management accounting focuses on the measurement and reporting of information that can help managers in making decisions to fulfill the goals of an organization. In management accounting, internal measures and reports are based on cost-benefit analysis, are not required to follow the accepted accounting principle. In 2014 CIMA created the Global Management Accounting Principles; the result of research from across 20 countries in five continents, the principles aim to guide best practice in the d
Real estate is "property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water. Also: the business of real estate, it is a legal term used in jurisdictions whose legal system is derived from English common law, such as India, Wales, Northern Ireland, United States, Pakistan and New Zealand. Residential real estate may contain either a single family or multifamily structure, available for occupation or for non-business purposes. Residences can be classified by. Different types of housing tenure can be used for the same physical type. For example, connected residences might be owned by a single entity and leased out, or owned separately with an agreement covering the relationship between units and common areas and concerns. Major categoriesAttached / multi-unit dwellings Apartment or Flat – An individual unit in a multi-unit building; the boundaries of the apartment are defined by a perimeter of locked or lockable doors. Seen in multi-story apartment buildings.
Multi-family house – Often seen in multi-story detached buildings, where each floor is a separate apartment or unit. Terraced house – A number of single or multi-unit buildings in a continuous row with shared walls and no intervening space. Condominium – A building or complex, similar to apartments, owned by individuals. Common grounds and common areas within the complex are shared jointly. In North America, there are rowhouse style condominiums as well; the British equivalent is a block of flats. Cooperative – A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit. Semi-detached dwellings Duplex – Two units with one shared wall. Detached dwellings Detached house or single-family detached house Portable dwellings Mobile homes or residential caravans – A full-time residence that can be movable on wheels. Houseboats – A floating home Tents – Usually temporary, with roof and walls consisting only of fabric-like material.
The size of an apartment or house can be described in square meters. In the United States, this includes the area of "living space", excluding the garage and other non-living spaces; the "square meters" figure of a house in Europe may report the total area of the walls enclosing the home, thus including any attached garage and non-living spaces, which makes it important to inquire what kind of surface area definition has been used. It can be described more by the number of rooms. A studio apartment has a single bedroom with no living room. A one-bedroom apartment has a dining room separate from the bedroom. Two bedroom, three bedroom, larger units are common. Other categoriesChawls Villas HavelisThe size of these is measured in Gaz, Marla and acre. See List of house types for a complete listing of housing types and layouts, real estate trends for shifts in the market, house or home for more general information, it is common practice for an intermediary to provide real estate owners with dedicated sales and marketing support in exchange for commission.
In North America, this intermediary is referred to as a real estate broker, or a real estate agent in everyday conversation, whilst in the United Kingdom, the intermediary would be referred to as an estate agent. In Australia the intermediary is referred to as a real estate agent or real estate representative or the agent
In finance, a futures contract is a standardized forward contract, a legal agreement to buy or sell something at a predetermined price at a specified time in the future, between parties not known to each other. The asset transacted is a commodity or financial instrument; the predetermined price the parties agree to buy and sell the asset for is known as the forward price. The specified time in the future—which is when delivery and payment occur—is known as the delivery date; because it is a function of an underlying asset, a futures contract is a derivative product. Contracts are negotiated at futures exchanges, which act as a marketplace between buyers and sellers; the buyer of a contract is said to be long position holder, the selling party is said to be short position holder. As both parties risk their counter-party walking away if the price goes against them, the contract may involve both parties lodging a margin of the value of the contract with a mutually trusted third party. For example, in gold futures trading, the margin varies between 2% and 20% depending on the volatility of the spot market.
The first futures contracts were negotiated for agricultural commodities, futures contracts were negotiated for natural resources such as oil. Financial futures were introduced in 1972, in recent decades, currency futures, interest rate futures and stock market index futures have played an large role in the overall futures markets; the original use of futures contracts was to mitigate the risk of price or exchange rate movements by allowing parties to fix prices or rates in advance for future transactions. This could be advantageous when a party expects to receive payment in foreign currency in the future, wishes to guard against an unfavorable movement of the currency in the interval before payment is received. However, futures contracts offer opportunities for speculation in that a trader who predicts that the price of an asset will move in a particular direction can contract to buy or sell it in the future at a price which will yield a profit; the Dutch pioneered several financial instruments and helped lay the foundations of the modern financial system.
In Europe, formal futures markets appeared in the Dutch Republic during the 17th century. Among the most notable of these early futures contracts were the tulip futures that developed during the height of the Dutch Tulipmania in 1636; the Dōjima Rice Exchange, first established in 1697 in Osaka, is considered by some to be the first futures exchange market, to meet the needs of samurai who—being paid in rice, after a series of bad harvests—needed a stable conversion to coin. The Chicago Board of Trade listed the first-ever standardized'exchange traded' forward contracts in 1864, which were called futures contracts; this contract was based on grain trading, started a trend that saw contracts created on a number of different commodities as well as a number of futures exchanges set up in countries around the world. By 1875 cotton futures were being traded in Bombay in India and within a few years this had expanded to futures on edible oilseeds complex, raw jute and jute goods and bullion; the 1972 creation of the International Monetary Market, the world's first financial futures exchange, launched currency futures.
In 1976, the IMM added interest rate futures on US treasury bills, in 1982 they added stock market index futures. Although futures contracts are oriented towards a future time point, their main purpose is to mitigate the risk of default by either party in the intervening period. In this vein, the futures exchange requires both parties to put up initial cash, or a performance bond, known as the margin. Margins, sometimes set as a percentage of the value of the futures contract, must be maintained throughout the life of the contract to guarantee the agreement, as over this time the price of the contract can vary as a function of supply and demand, causing one side of the exchange to lose money at the expense of the other. To mitigate the risk of default, the product is marked to market on a daily basis where the difference between the initial agreed-upon price and the actual daily futures price is re-evaluated daily; this is sometimes known as the variation margin, where the futures exchange will draw money out of the losing party's margin account and put it into that of the other party, ensuring the correct loss or profit is reflected daily.
If the margin account goes below a certain value set by the exchange a margin call is made and the account owner must replenish the margin account. This process is known as marking to market, thus on the delivery date, the amount exchanged is not the specified price on the contract but the spot value. Upon marketing, the strike price is reached and creates lots of income for the "caller." To minimize credit risk to the exchange, traders must post a margin or a performance bond 5%-15% of the contract's value. Unlike use of the term margin in equities, this performance bond is not a partial payment used to purchase a security, but a good-faith deposit held to cover the day-to-day obligations of maintaining the position. To minimize counterparty risk to traders, trades executed on regulated futures exchanges are guaranteed by a clearing house; the clearing house becomes the buyer to each seller, the seller to each buyer, so that in the event of a counterparty default the clearer assumes the risk of loss.
This enables traders to transact without performing due diligence on their counterparty. Margin requirements are waived or reduced in some cases for hedgers who have physical ownership of the covered commodity or spread traders who hav
A tax haven is defined as a country or place with low "effective" rates of taxation for foreigners. In some traditional definitions, a tax haven offers financial secrecy. However, while countries with high levels of secrecy but high rates of taxation, can feature in some tax haven lists, they are not universally considered as tax havens. In contrast, countries with lower levels of secrecy but low "effective" rates of taxation, appear in most § Tax haven lists; the consensus around effective tax rates has led academics to note that the term "tax haven" and "offshore financial centre" are synonymous. Traditional tax havens, like Jersey, are open about zero rates of taxation, but as a consequence have limited bilateral tax treaties. Modern corporate tax havens have non-zero "headline" rates of taxation and high levels of OECD–compliance, thus have large networks of bilateral tax treaties. However, their base erosion and profit shifting tools enable corporates to achieve "effective" tax rates closer to zero, not just in the haven but in all countries with which the haven has tax treaties.
According to modern studies, the § Top 10 tax havens include corporate-focused havens like Ireland, the Netherlands and the U. K. while Switzerland, Hong Kong, the Caribbean, feature as both major traditional tax havens and major corporate tax havens. Corporate tax havens serve as "conduits" to traditional tax havens. Use of tax havens results in a loss of tax revenues to countries. Estimates of the § Financial scale of taxes avoided vary, but the most credible have a range of US$100–250 billion per annum. In addition, capital held in tax havens can permanently leave the tax base. Estimates of capital held in tax havens vary: the most credible estimates are between US$7–10 trillion; the harm of traditional and corporate tax havens has been noted in developing nations, where the tax revenues are needed to build infrastructure. Over 15% of countries are tax havens. Tax havens are successful and well-governed economies, being a haven has brought prosperity; the top 10–15 GDP-per-capita countries, excluding oil and gas exporters, are tax havens.
Because of § Inflated GDP-per-capita, havens are prone to over-leverage. This can lead to severe credit cycles and/or property/banking crises when international capital flows are repriced. Ireland's Celtic Tiger, the subsequent financial crisis in 2009–13, is an example. Jersey is another. Research shows the § U. S. as the largest beneficiary, use of tax havens by U. S corporates maximised long-term U. S. exchequer receipts. The rise of OECD-compliant corporate tax havens, whose BEPS tools are responsible for most of the lost taxes, has led to criticism of this approach, versus actual taxes paid. Higher-tax jurisdictions, such as the United States and many member states of the European Union, departed from the OECD BEPS Project in 2017–18, to introduce anti-BEPS tax regimes, targeted raising net taxes paid by corporations in corporate tax havens. There is no established consensus regarding a specific definition for; this is the conclusion from non-governmental organisations, such as the Tax Justice Network in 2018, from the 2008 investigation by the U.
S. Government Accountability Office, from the 2015 investigation by the U. S. Congressional Research Service, from the 2017 investigation by the European Parliament, from leading academic researchers of tax havens; the issue, however, is material, as being labelled a "tax haven" has consequences for a country seeking to develop and trade under bilateral tax treaties. When Ireland was "blacklisted" by G20 member Brazil in 2016, bilateral trade declined, it is more onerous for corporate tax havens, whose foreign multinationals rely on the haven's extensive network of bilateral tax treaties, through which the foreign multinationals execute BEPS transactions, re-routing global untaxed income to the haven. One of the first § Important papers on tax havens, was the 1994 Hines–Rice paper by James R. Hines Jr, it is the most cited paper on tax haven research in late 2017, Hines is the most cited author on tax haven research. As well as offering insights into tax havens, it took the view that the diversity of countries that become tax havens was so great that detailed definitions were inappropriate.
Hines noted that tax havens were: a group of countries with unusually low tax rates. Hines reaffirmed this approach in a 2009 paper with Dhammika Dharmapala. In December 2008, Dharmapala wrote that the OECD process had removed much of the need to include "bank secrecy" in any definition of a tax haven and that it was now "first and foremost, low or zero corporate tax rates", this has become the general "financial dictionary" definition of a tax haven. Hines refined his definition in 2016 to incorporate research on § Incentives for tax havens on governance, broadly accepted in the academic lexicon. Tax havens are small, well-governed states that impose low or zero tax rates on foreign investors. In April 1998, the OE
A mortgage loan or mortgage is used either by purchasers of real property to raise funds to buy real estate, or alternatively by existing property owners to raise funds for any purpose, while putting a lien on the property being mortgaged. The loan is "secured" on the borrower's property through a process known as mortgage origination; this means that a legal mechanism is put into place which allows the lender to take possession and sell the secured property to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms. The word mortgage is derived from a Law French term used in Britain in the Middle Ages meaning "death pledge" and refers to the pledge ending when either the obligation is fulfilled or the property is taken through foreclosure. A mortgage can be described as "a borrower giving consideration in the form of a collateral for a benefit". Mortgage borrowers can be individuals mortgaging their home or they can be businesses mortgaging commercial property.
The lender will be a financial institution, such as a bank, credit union or building society, depending on the country concerned, the loan arrangements can be made either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, other characteristics can vary considerably; the lender's rights over the secured property take priority over the borrower's other creditors, which means that if the borrower becomes bankrupt or insolvent, the other creditors will only be repaid the debts owed to them from a sale of the secured property if the mortgage lender is repaid in full first. In many jurisdictions, it is normal for home purchases to be funded by a mortgage loan. Few individuals have enough savings or liquid funds to enable them to purchase property outright. In countries where the demand for home ownership is highest, strong domestic markets for mortgages have developed. Mortgages can either be funded through the banking sector or through the capital markets through a process called "securitization", which converts pools of mortgages into fungible bonds that can be sold to investors in small denominations.
According to Anglo-American property law, a mortgage occurs when an owner pledges his or her interest as security or collateral for a loan. Therefore, a mortgage is an encumbrance on the right to the property just as an easement would be, but because most mortgages occur as a condition for new loan money, the word mortgage has become the generic term for a loan secured by such real property; as with other types of loans, mortgages have an interest rate and are scheduled to amortize over a set period of time 30 years. All types of real property can be, are, secured with a mortgage and bear an interest rate, supposed to reflect the lender's risk. Mortgage lending is the primary mechanism used in many countries to finance private ownership of residential and commercial property. Although the terminology and precise forms will differ from country to country, the basic components tend to be similar: Property: the physical residence being financed; the exact form of ownership will vary from country to country, may restrict the types of lending that are possible.
Mortgage: the security interest of the lender in the property, which may entail restrictions on the use or disposal of the property. Restrictions may include requirements to purchase home insurance and mortgage insurance, or pay off outstanding debt before selling the property. Borrower: the person borrowing who either has or is creating an ownership interest in the property. Lender: any lender, but a bank or other financial institution. Principal: the original size of the loan, which may or may not include certain other costs. Interest: a financial charge for use of the lender's money. Foreclosure or repossession: the possibility that the lender has to foreclose, repossess or seize the property under certain circumstances is essential to a mortgage loan. Completion: legal completion of the mortgage deed, hence the start of the mortgage. Redemption: final repayment of the amount outstanding, which may be a "natural redemption" at the end of the scheduled term or a lump sum redemption when the borrower decides to sell the property.
A closed mortgage account is said to be "redeemed". Many other specific characteristics are common to many markets, but the above are the essential features. Governments regulate many aspects of mortgage lending, either directly or indirectly, through state intervention. Other aspects that define a specific mortgage market may be regional, historical, or driven by specific characteristics of the legal or financial system. Mortgage loans are gen
Financial statements are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form, easy to understand, they include four basic financial statements accompanied by a management discussion and analysis: A balance sheet or statement of financial position, reports on a company's assets and owners equity at a given point in time. An income statement—or profit and loss report, or statement of comprehensive income, or statement of revenue & expense—reports on a company's income and profits over a stated period of time. A profit and loss statement provides information on the operation of the enterprise; these include the various expenses incurred during the stated period. A statement of changes in equity or equity statement, or statement of retained earnings, reports on the changes in equity of the company over a stated period of time. A cash flow statement reports on a company's cash flow activities its operating and financing activities over a stated period of time.
For large corporations, these statements may be complex and may include an extensive set of footnotes to the financial statements and management discussion and analysis. The notes describe each item on the balance sheet, income statement and cash flow statement in further detail. Notes to financial statements are considered an integral part of the financial statements. "The objective of financial statements is to provide information about the financial position and changes in financial position of an enterprise, useful to a wide range of users in making economic decisions." Financial statements should be understandable, relevant and comparable. Reported assets, equity and expenses are directly related to an organization's financial position. Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently." Financial statements may be used by users for different purposes: Owners and managers require financial statements to make important business decisions that affect its continued operations.
Financial analysis is performed on these statements to provide management with a more detailed understanding of the figures. These statements are used as part of management's annual report to the stockholders. Employees need these reports in making collective bargaining agreements with the management, in the case of labor unions or for individuals in discussing their compensation and rankings. Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are used by investors and are prepared by professionals, thus providing them with the basis for making investment decisions. Financial institutions use them to decide whether to grant a company with fresh working capital or extend debt securities to finance expansion and other significant expenditures. Consolidated financial statements are defined as "Financial statements of a group in which the assets, equity, income and cash flows of the parent and its subsidiaries are presented as those of a single economic entity", according to International Accounting Standard 27 "Consolidated and separate financial statements", International Financial Reporting Standard 10 "Consolidated financial statements".
The rules for the recording and presentation of government financial statements may be different from those required for business and for non-profit organizations. They may use either of two accounting methods: accrual accounting, or cost accounting, or a combination of the two. A complete set of chart of accounts is used, different from the chart of a profit-oriented business. Personal financial statements may be required from persons applying for a personal loan or financial aid. A personal financial statement consists of a single form for reporting held assets and liabilities, or personal sources of income and expenses, or both; the form to be filled out is determined by the organization supplying the aid. Although laws differ from country to country, an audit of the financial statements of a public company is required for investment and tax purposes; these are performed by independent accountants or auditing firms. Results of the audit are summarized in an audit report that either provide an unqualified opinion on the financial statements or qualifications as to its fairness and accuracy.
The audit opinion on the financial statements is included in the annual report. There has been much legal debate over. Since audit reports tend to be addressed to the current shareholders, it is thought that they owe a legal duty of care to them, but this may not be the case as determined by common law precedent. In Canada, auditors are liable only to investors using a prospectus to buy shares in the primary market. In the United Kingdom, they have been held liable to potential investors when the auditor was aware of the potential investor and how they would use the information in the financial statements. Nowadays auditors tend to include in their report liability restrict