ACCOUNTING SYSTEM Definition

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ACCOUNTING SYSTEM is the set of manual and computerized procedures and controls that provide for identifying relevant transactions or events; preparing accurate source documents, entering data into the accounting records accurately, processing transactions accurately, updating master files properly, and generating accurate documents and reports.

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ACCRUAL BOND is a bond on which interest accrues, but is not paid out to the investor during the time of accrual; instead, the accrual interest is added to the amount of remaining principal and paid at maturity. Also known as an accretion bond or a Z-bond in a CMO issue. See Collateralized Mortgage Obligation.

QUALIFIED DIVIDENDS are the ordinary dividends received in tax years beginning after 2002 that are subject to the same 5% or 15% maximum tax rate that applies to net capital gain. They are shown in box 1b of Form 1099 DIV. Qualified dividends are subject to the new 15% maximum capital gains rate if the applicable regular tax rate is 25% or higher. If the applicable regular tax rate is lower than 25%, qualified dividends are subject to the new 5% maximum capital gains rate. To qualify for the 5% or 15% maximum rate, all of the following requirements must be met: a. The dividends must have been paid by a U.S. corporation or a qualified foreign corporation; b. The dividends are not of the type listed later under Dividends that are not qualified dividends; and, c. The proper holding period is met. The following dividends are not qualified dividends. They are not qualified dividends even if they are shown in box 1b of Form 1099 DIV: a. Capital gain distributions; b. Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U.S. building and loan associations, U.S. savings and loan associations, federal savings and loan associations, and similar financial institutions. These amounts are reportable as interest income; c. Dividends from a corporation that is a tax-exempt organization or farmer's cooperative during the corporation's tax year in which the dividends were paid or during the corporation's previous tax year; d. Dividends paid by a corporation on employer securities that are held on the date of record by an employee stock ownership plan (ESOP) maintained by that corporation; e. Dividends on any share of stock to the extent that the shareholder is obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property; and, f. Payments in lieu of dividends, but only if the shareholder knows or has reason to know that the payments are not qualified dividends.

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