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Glossary

401(k): By definition, a 401(k) plan is an arrangement that allow an emploee to choose between taking compensation in chas or deferring a percentage of it to a 401(k) account under the plan. The amount defrred is usually not taxable to the employee until it is withdrawn or distributed from the plan. However, if the plan permits, an employee can make (401 (k) contributions on an after-tax basis (thses accounts are know as Roth 401 (k)s), and these amount are generally tax-free when withdrawn. 401(k) plans are a type of retirement plan known as a qualified plan, which means that this plan is governed by the regulation stipulation in the Employee Retirement Income Security Act of 1974 and the tax code. Qualified plans can be divided tow different ways: they can be either defined-contribuito or defined-benefit (pension) plans. 401(k) plans are a type of defined-contribuiton plan which means that a participant’s balance is determined by the contribution made to the plan and the performance of the plan investments. The employer is usually not required to make contributions to the plan, as is usually the case with a pension plan. However, many employers choose to match their emplyees’ contributions up to a certainpercentage, and/or make contributions under a profit -sharing feature.

403(b): A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of pubic schools, employees of certain tax-exempt organization, and certain miniters. For more informaiotn please see https://www.irs.gov/publications/p571/ch01.html)

Account Balance: The net of credits and debits for an account at the end of a reporting period.

Account Reconciliation: The process of ensuring that the beginning balance plus the sum of all entries on an account statement equals the ending balance. After deposits, interest received, and credits are added and automatic withdrawals, outstanding checks, negotiated checks, and account charges are subtracted, if the resulting balance equals the ending balance on the statement, the account is reconciled.

Accountant: An individual trained and knowledgeable in the profession of accountancy.

Accounting (Accountancy): The function of compiling and providing financial information primarily by reports referred to as financial statements. 

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