Financial Terms Glossary - D

debenture
A bond, a long-term unsecured debt issued by a corporation. On dissolution of the corporation, bondholders take preference over shareholders, and interest payable on the bonds takes preference over dividends to shareholders.

debit
Debit and credit are two of the most confusing terms in the financial world. They mean one thing when your banker is discussing your account balance. And they take almost the opposite meaning when used by your accountant. In accounting, a debit increases the balance of an asset or expense account; a credit to the same account decreases the balance. It would serve you better if all professionals used the terms "increase" or "decrease" in a given account. Debit and credit are terms used in double-entry accounting.

deed
A legal document transferring ownership in real estate.

deed of trust
A legal document that transfers property to a trustee to secure the payment of a loan. It serves much the same purpose as a mortgage. The title to real estate is placed in the hands of a trustee; it is transferred to the buyer of the property when the debt has been paid in full.

demand deposit
Any bank deposit that can be taken out without notice or without having to wait until a specified date.

dependent
For income tax purposes, a dependent is someone who qualifies to be claimed as an exemption on your income tax return because of your financial support of that person. There are qualifying restrictions based on age, income, citizenship, and family relationship.

depletion
The amount of cost assigned to the extracted portion of a natural resource such as minerals. You take a depreciation deduction on equipment and buildings, and you take a depletion deduction on your mining operation.

depreciable property
Assets such as buildings, furniture, fixtures, equipment, and machinery that have a limited useful life.

depreciation
A deduction for a portion of the cost of a fixed asset presented as an expense in the income statement (profit and loss statement) for the current accounting period, such as for the current year. It allows the cost of the asset to be written off over its useful life.

direct cost (expense)
Also called variable costs. They vary with the level of sales as opposed to fixed costs which do not go up and down with sales. For example, if you deliver the products you sell, delivery expenses (variable costs) will go up as sales go up. Building rent and insurance (fixed costs) on the other hand, do not normally fluctuate with sales.

dividend reinvestment plan
See DRIP.

domestic corporation
In the case of a particular state, this refers to corporations created under the laws of that state. Foreign corporations would be those created outside that state. In the case of the federal tax law, a domestic corporation is one formed in the United States.

donee
The one who receives a gift.

donor
The one who makes a gift.

double-entry accounting
A method of keeping books that requires offsetting entries. For every debit there must be an equal credit. If you deposit money in your bank account (a debit) there must be an offsetting entry. Where did the money come from? Was it from sales or a bank loan perhaps, either of which would be increased (a credit) for an equal amount to that deposited in the bank.

DPOA
See durable power of attorney.

DRIP (dividend reinvestment plan)
This is a program used by some publicly traded companies to make it easy for stockholders to reinvest their dividends in more company stock. Instead of sending the investor a dividend check, the company buys more stock on behalf of the investor. Most dividend reinvestment plans do not charge fees or commissions on the transaction.

drop shipment
A shipment of goods directly to the customer from the distributor. This avoids the delay and expense of shipping to the selling company and then having the seller deliver to the customer.

durable power of attorney (DPOA)
A power of attorney designed to remain effective even if you become mentally incapacitated. This legal document gives whoever you name the legal right to act on your behalf. The document generally defines the specific things your agent is authorized to do and under what circumstances the "power" takes effect. A document you would want your attorney to draft.