B
 

backup withholding
Those who make payments to others of interest, dividends, rents, royalties, etc., must, under certain circumstances, withhold income tax from the payment. For example, if you fail to provide your bank with your taxpayer identification number, the bank is required to withhold income tax from the interest it pays you.


bad debt
Bad debts for income tax purposes are divided into two types: business bad debts and nonbusiness bad debts. In order to get the more favorable tax treatment as a business bad debt, the taxpayer must meet the business debt requirements under the tax law.


balance sheet
A better name for a balance sheet might be "a list of assets and debts." Your balance sheet shows what you own and what you owe, the difference being your net worth. A balance sheet is like a still photograph taken at some single point in time. Balance sheets are as of a given date. An income statement on the other hand, is for a period of time, such as a month or year. It is the moving picture to show how your balance sheet got from one point in time to another. In business, the income statement shows how many sales were made and how many expenses were incurred to cause your balance sheet (net worth) to go up or down a certain amount.
See also financial statement.


balloon payment
A contract that usually calls for payments at regular intervals with any unpaid balance (balloon) due on a specified date.


bank reconciliation
A report that shows the differences between your checkbook balance and what the bank's balance shows. It contains a listing of outstanding checks and deposits that the bank has not yet received. All differences between your checkbook balance and the bank's balance should be identified (reconciled).


basis
This is often referred to as cost basis. Normally, basis is the amount you paid for an item, plus the cost of any improvements and minus depreciation if applicable.


bear market
A bearish stock market is one in which the prices are in a downward trend. A bull market is just the opposite.


below the line
These are extraordinary expenses in a business, ones which will not normally be repeated, such as expenses for disaster losses.
See also above the line.


beneficiary
The person or organization who will be receiving the benefits from a trust, an inherited retirement account, or the proceeds from a life insurance policy.


Big Board
A popular term used to refer to the New York Stock Exchange.


bill of sale
A written document showing the terms by which the ownership of personal property passed from one person to another, usually showing dates, dollar amount, and the description of the property.


bimonthly
According to Webster, bi can mean every two months or twice a month. And semi can also lead to misunderstanding. Perhaps it is better to state what you mean by simply stating either "every two months" or "twice each month."


blue chip
These are stocks and bonds of well-established and proven companies. The companies are well-managed and have a long record of top performance.


bond
In addition to a bond that you might buy for an investment, bonds also refer to insurance products. A performance bond protects you against loss in the event that a contractor is unable or unwilling to complete a construction project. Or an employer may choose to bond an employee who has access to company funds against losses from embezzlement.


book of original entry
A book or journal in which financial transactions are recorded. The source of the data which goes into the journals is usually from sales slips, invoices, checks, etc.


book value
The basis in an asset determined by taking the cost, plus improvements minus any depreciation taken. The book value of an asset may be well below its fair market value.


breakeven point
The point at which the sales and expenses in a business are equal, creating neither a profit nor a loss. This is a very important figure to a business manager. It assists the manager in setting prices that will make the business competitive yet profitable.


bull market
A condition of the stock market during which stock prices are going up and are expected to continue their upward trend. A bear market is just the opposite.


buyer's market
A condition indicating an excess of supply over demand. This usually puts a buyer in a more favorable negotiating position.
See also seller's market.


bypass trust
A trust is used in estate tax planning to insure that the estate tax exclusion allowed to both spouses is utilized. Assets placed in this trust will not be taxed when the second spouse dies; hence the name bypass trust. These are also known as credit shelter trusts.

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