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lapping
A process for stealing money from a business by covering the payment by one customer with the payment from another. For example, when customer A pays his bill, the employee pockets the money. Before the theft can be detected, A's account is shown as paid when B pays his bill. The scheme can go on for an extended period by lapping customer over customer. This theft will show up if the thief is absent from the business for more than just a day or two. This is why some businesses require employees to take their vacations as scheduled and remain off the premises for the entire vacation. A proper division of employee duties can help reduce opportunities for employee theft.
See also internal control.


last in, first out (LIFO)
An inventory pricing method that assumes the last item purchased is the first item sold. If the cost of merchandise is going up, the higher-cost, newer purchases are charged against sales and produce a lower net profit. The older, less expensive items are deemed to be on hand at the end of the year and create a lower inventory valuation.
See also first in, first out (FIFO).


ledger
The book of accounts into which the summary from the journals are entered. Also, a ledger account is an individual account that shows all the debits and credits and the ending balance at the end of an accounting period. For example, the ledger account for cash in bank will show a debit for the summary of all deposits from the cash receipts journal and a credit for all expenditures from the cash disbursements journal. The resulting balance in the cash in bank ledger account will be reconciled to the balance on the bank statement.


legal entity
Any organization that can function with separate legal existence. An entity such as a corporation, partnership, trust, etc., that can sue or be sued.



lessee
One who rents (leases) property from another.



lessor
One who rents (leases) property to another. In the case of real estate leases, the lessor is also known as the landlord.


letter of credit
An authorization by a bank that they will stand behind the performance of a buyer under specified conditions. This allows a seller to feel free to deliver goods or services to a buyer without concern for the buyer's ability to pay.


levy
There are several uses for the term levy. Of interest to most taxpayers would be the use to which the IRS puts a levy. This is a means by which the IRS can force collection of unpaid taxes. The levy can be applied against almost any asset you have. The most common and easiest to attach are your bank accounts and your wages. The IRS regulations require a pre-notification to the taxpayer before a levy can be put in force. If you stay in contact with the IRS and work out a payment schedule for delinquent taxes, you should be able to avoid having a levy against your assets.


licensed public accountant (LPA)
A designation in some states for public accountants who have met certain licensing requirements.
See also public accountant (PA) and certified public accountant (CPA).


lien
A security interest that attaches to property. Should the property be sold, this gives the government or other claimant a right to the proceeds in an amount necessary to satisfy the lien. For example, a taxing authority may file a lien against the property for unpaid real estate taxes.
See also mechanic's lien.


life insurance trust
An irrevocable trust established to keep life insurance out of a person's taxable estate.


life annuity
An annuity (series of payments) that terminates when the beneficiary dies.


life tenant
A person entitled to the use of real estate or the income from that real estate for the duration of his or her life. The ownership rights go to the remainderman on the death of the life tenant.


like-kind exchange
See Section 1031 and tax-deferred exchange.


limited liability company (LLC)
A legal entity that is a hybrid between a corporation and a partnership. The members (shareholders) enjoy limited liability as they would with a corporation, but the income of the LLC can be taxed to the members as if it were a partnership, corporation, or sole proprietorship.


limited partnership
A partnership in which some, but not all, of the partners have limited liability from creditor claims. There must be at least one general partner in a limited partnership. The limited partners contribute capital and share in the profits and losses, but they do not take part in running the business.


liquidation value
The net value of all the assets of a business that is being liquidated. Contrast this with going-concern value.


living trust
A trust created during the lifetime of the one who sets it up.
See also testamentary trust.


living will
Not to be confused with a living trust. A living will is a medical directive that spells out what you want to happen under circumstances when you are unable to speak for yourself, and your death is eminent due to an incurable medical condition.


load (investments)
See front-end load.


long-term capital gain
See capital gain.


LLC
See limited liability company.


lump-sum distribution
This is the payout of an individual's entire interest in a pension plan. The income tax on the distribution is determined by several factors, including the age of the recipient, the reason for the distribution, and the amount and type of contributions to the plan by the individual. If you are facing a lump-sum distribution from your retirement plan, see us about the tax consequences.
 

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