EDP (electronic data processing): A term referring to the use of computers in recording, classifying, manipulating, and summarizing data.

Effective-Interest Amortization: A method of systematically writing off a bond premium or discount that takes into consideration the time value of money and results in an equal rate of amortization for each period.

Effective Tax Rate: A tax rate that reflects the percentage of the actual tax liability to the accounting income generated by the company, that is, net tax liability/financial (book) income before taxes.

Effective (yield or market) Rate of Interest: The actual interest rate earned or paid on a bond investment.

Electronic Data Processing (EDP): A term referring to the use of computers in recording, classifying, manipulating, and summarizing data.

Emergency Funds: Cash amounts set aside to cover unforeseen expenditures in a fiscal year.

Encumbrance: A liability (example: a mortgage is an encumbrance on a property). Also, it is any amount of money set aside for any purpose.

Entity: An organizational unit (a person, partnership, or corporation) for which accounting records are kept and about which accounting reports are prepared.

Entry: Part of a transaction posted in a journal or recorded in a journal.

Equity: The value of the business to the owner of the business. (The difference between the business's assets and liabilities).

Equity Financing: Acquiring funds in the form of investments by owners (proprietor, partner, or stockholder).

Equity Method or Accounting for Investments in Stocks: Method used to account for an investments in the stock of another company when significant influence can be imposed (presumed to exist when 20 to 50 percent of the outstanding voting stock is owned).

Equity Securities: Shares of ownership in a corporation that can change significantly in value and that provide for a return to investors in the form of dividends.

Error of Commission: A double-entry term which means that one or both sides of the entry has been posted to the incorrect account (but is within the same class of account). Example: Gasoline expense posted to the vehicle maintenance expense.

Error of Omission: A double-entry term which means that a transaction has been omitted from the books entirely.

Error of Original Entry: A double-entry term which means that a transaction has been entered with the wrong amount.

Error of Principle: A double-entry term which means that one or both sides of the entry has been posted to the incorrect account (which is also a different class of account). Example: Gasoline expense posted to the electrical expense.

Estimated Life: The expected economic useful life of an asset from the date placed in service to the projected retirement date.

Exchange Gain or Loss: The gain or loss incurred when the exchange rates are different on the purchase and payment dates or on the sale and receipt of payment dates.

Exchange Rate: The value of one currency in terms of another.

Exclusions: Gross receipts that are not subject to tax and are not included in gross income, such as interest on state and local government bonds.

Expenditure Report: A report that is created at the end of every quarter that shows the total year-to-date expenditures by department.

Expenses: Costs incurred in the normal course of business to generate revenues. This does not include goods bought for re-sale or any items of a capital nature.

External Auditors: Independent CPAs who are retained by organizations to perform audits of financial statements.

External Audits: Audits conducted by CPAs who are independent of the client company.

Extraordinary Items: Nonoperating gains and losses that are unusual in nature, infrequent in occurrence, and material in amount.