Accounting & Tax Definitions -- D

Debit: Entry recording an increase to an asset or expense or a reduction to a liability, revenue or owner's equity. Debits are recorded in the left-hand column of an account or a two-column book. Opposite of credit.

Deficit: A negative amount (debit balance) of retained earnings caused by cumulative losses and dividend distributions exceeding cumulative net income.

Demand Loan: Loan repayable upon demand of creditor.

Dependent: An individual who qualifies to be claimed as a dependent exemption on another person's income tax return.

Depletion: Gradual using up or consumption of a natural resource.

Depreciation: Accounting process of allocating in a systematic manner the cost or other basic value of a tangible, long-lived asset or group of assets over the useful life of the asset. See Amortization.

Direct Cost: Costs identified with a specific unit of product (for example, clay in the production of flowerpots or tubing in the production of bicycles).

Direct Deposit: When you give the IRS the go-ahead, they'll send your refund directly to your bank account. It's the fastest way to get your cash.

Directors: Directors are elected by the shareholders. They manage or direct the affairs of the corporation. Typically, the directors make only major business decisions and monitor the activities of the officers.

Direct Tax: A direct tax cannot be shifted to others (unlike an indirect tax). A good example of a direct tax is the Federal income tax. You just have to pay it.

Disposable Income: An individual's income after taxes.

Dissolution: The termination of a corporation's legal existence. Dissolution may be caused many ways including: failure to file annual reports, failure to pay certain taxes, bankruptcy, or voluntary dissolution of the corporation by the shareholders and directors.

Dividend: A distribution of money or property paid by the corporation to a shareholder. These distributions are subject to a double tax; both the corporation and the dividend recipient must pay federal taxes on these earnings.

Domestic Corporation: A Corporation is a domestic corporation in the state where it has incorporated.

Double Taxation: Corporations are treated as a separate legal taxable entity for income tax purposes. Therefore, corporations pay tax on their earnings. If corporate earnings are distributed to shareholders in the form of dividends, the corporation does not receive the reasonable business expense deduction, and dividend income is taxed as regular income to the shareholders. Thus, to the extent that earnings are distributed to shareholders as dividends, there is a double tax on earnings at the corporate and shareholder level. S corporations and LLCs are pass-through entities that are not subject to the double tax.