Glossary of Financial Terms
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DAYS PAYABLE - The number of days on average it takes for an organization to pay bills that it owes to outside vendors.
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DAYS RECEIVABLE - The number of days on average it takes for an organization to collect receipts it is owed.
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DBA - Doing business as. See assumed name.
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DEBT - An amount owed to a person or organization for money borrowed. Debt can be represented by a promissory note, bond, mortgage or other form stating repayment terms and interest requirements. Debt may or may not secured by a pledge of assets. Also known as borrowed money or borrowed funds.
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DEBT SERVICE - Required repayment of principal and interest for a loan, usually expressed annually. (Note: financial statements prepared on an accrual basis will show interest expense on the Statement of Activities, while principle will appear on the Balance Sheet.)
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DEFAULT - There are two types of default: Debt service default occurs when a borrower fails to make a scheduled payment of interest or principal on a loan. Technical default occurs when a covenant of the loan is violated.
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DEFERRED REVENUE/INCOME - Payment received from a client for a transaction that has not yet occurred (e.g., subscription purchase for performances held on future dates). This situation creates an obligation, and thus a liability, for the organization to provide goods or services in the future. (Note: Financial Accounting Standards 116 and 117 reduced substantially the instances in which nonprofits should use such categorization by introducing the concept of temporarily restricted net assets.)
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DEFICIT - The excess of expenses over revenue during an accounting period. Deficits can be measured before or after depreciation and non-operating activities. See surplus.
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DEPRECIATION - A non-cash expense associated with reducing a fixed asset’s book value due to general wear and tear over its defined accounting or useful life. Depreciation is only an approximation of the amount needed to replace fixed assets.
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