Glossary Terms

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid. It provides a more accurate representation of a company's financial position and performance.

An administrator is an individual or entity appointed by the probate court to manage the estate when there is no valid will or when the named executor is unable or unwilling to serve. The administrator's responsibilities are similar to those of an executor.

An appeal bond, also known as a supersedeas bond, is a court bond required when a party wishes to appeal a court judgment. It serves as a guarantee that the appellant will fulfill the judgment if the appeal is unsuccessful. The bond provides security for the appellee's potential financial losses during the appeal process.

Resources owned or controlled by a company that have future economic value, such as cash, accounts receivable, inventory, and property.

An independent examination and verification of a company's financial records, transactions, and statements by a certified public accountant (CPA) or an external auditing firm. It provides assurance on the accuracy and fairness of the financial information.

A financial statement that presents a company's financial position at a specific point in time. It shows the company's assets, liabilities, and equity, providing a snapshot of its financial health.

A bid bond is a type of contract surety bond that contractors submit with their project bids. It guarantees that if the contractor is awarded the project, they will enter into a contract and provide the required performance and payment bonds.

The bond amount is the maximum liability of the surety in the event of a claim.

The bond premium refers to the cost of obtaining the probate bond. It is typically a percentage of the bond amount.

Renewal may require submitting updated financial information, paying the bond premium for the renewal term, and meeting any other requirements set by the court.

A financial statement that reports the cash inflows and outflows resulting from a company's operating, investing, and financing activities. It helps assess the company's ability to generate and manage cash.

A court bond, also known as a judicial bond or legal bond, is a type of surety bond required by a court to ensure the protection of parties involved in a legal proceeding. It provides financial security and guarantees the performance of certain obligations or the payment of damages as ordered by the court.

Default occurs when the principal fails to fulfill their obligations or breaches the terms of the contract. In a surety arrangement, if the principal defaults, the surety may be required to step in and fulfill the obligations on behalf of the principal or compensate the obligee for any resulting losses.

A defendant's bond is a court bond required from the defendant to secure the defendant's right to defend a legal claim while protecting the plaintiff's interests. It ensures that the defendant will comply with any court-ordered judgments or damages if they are found liable.

The systematic allocation of the cost of a long-term tangible asset over its useful life. It reflects the reduction in the asset's value due to wear and tear, obsolescence, or other factors.

The residual interest in the assets of a company after deducting liabilities. It represents the ownership interest or shareholders' equity in a business.

An executor is an individual or entity named in a will and appointed by the probate court to administer the estate of a deceased person. The executor is responsible for managing the assets, paying debts and taxes, and distributing the estate according to the terms of the will.

The outflow of assets or incurrence of liabilities resulting from the ordinary course of business activities. Expenses are incurred to generate revenue or maintain the company's operations.

A fiduciary refers to an individual or entity entrusted with the responsibility to act in the best interests of another party. In the context of probate bonds, the executor or administrator is considered a fiduciary, as they are entrusted with managing and distributing the estate assets.

A fiduciary bond is a court bond required when an individual or entity is appointed by the court to act as a fiduciary, such as an executor, guardian, or trustee. The bond ensures that the fiduciary will carry out their duties faithfully and honestly, protecting the interests of the beneficiaries or wards.

A set of standardized accounting principles, standards, and procedures that companies are expected to follow when preparing financial statements. It ensures consistency, comparability, and reliability of financial reporting.

A financial statement that summarizes a company's revenues, expenses, and net income or loss for a specific period. It provides an overview of the company's profitability.

Indemnity refers to a legal agreement where one party agrees to compensate another party for any losses, damages, or liabilities incurred. In a surety context, the principal may be required to provide an indemnity agreement to the surety, promising to reimburse the surety for any losses or expenses it incurs due to the principal's default.

An indemnity bond is a court bond required to protect one party against potential losses or damages resulting from a specific legal action. It provides financial security to the indemnified party if they suffer harm due to the actions of another party.

Obligations or debts owed by a company to external parties, such as loans, accounts payable, and accrued expenses.

A surety bond that is purchased by a contractor as a requirement to protect the project owner from defects, faulty materials, and poor workmanship for a certain period of time after the project is complete.

The obligee is the person or entity to whom the obligation is owed. In a surety arrangement, the obligee is the party who benefits from the surety's guarantee and has the right to enforce the obligations against the surety.

The obligee is the party protected by the probate bond, typically the beneficiaries or heirs of the estate. The bond provides financial protection to the obligee against losses resulting from the fiduciary's misconduct or mismanagement of the estate.

A payment bond is a contract surety bond that guarantees the contractor will pay subcontractors, suppliers, and laborers involved in the construction project. It ensures that these parties receive the payment they are entitled to, even if the contractor fails to make the payments.

A performance bond is a contract surety bond that ensures the contractor will complete the construction project according to the terms and conditions outlined in the contract. If the contractor fails to fulfill their obligations, the bond provides financial compensation to the project owner to cover the cost of completing the project.

A plaintiff's bond is a court bond required when a plaintiff seeks a court-ordered remedy, such as an injunction or attachment. It provides protection to the defendant against potential damages if it is later determined that the plaintiff's claim was wrongful or improperly sought.

The principal is the person or entity that owes a duty, obligation, or debt to another party. In a surety arrangement, the principal is the party whose obligations are being guaranteed by the surety.

A probate bond, also known as an executor bond, administrator bond, or fiduciary bond, is a type of surety bond required by a probate court to protect the estate and its beneficiaries. It guarantees the faithful performance of duties by the executor, administrator, or fiduciary appointed to manage the estate.

A bond that guarantees protects against violations of duty committed by a public official.

A legal action to recover personal property wrongfully taken or held by the defendant.

The inflow of assets or economic benefits resulting from the sale of goods, provision of services, or other activities that constitute the ongoing operations of a company.

A United States government agency that provides support to small businesses and entrepreneurs. The SBA has programs to assist small businesses and minority-owned contractors in obtaining contract bonds.

A surety is a person or entity that agrees to be legally responsible for fulfilling the obligations or debts of another person or entity. The surety provides a guarantee or promise to the beneficiary (usually the creditor or the party receiving the benefit) that the obligations will be fulfilled.

A surety bond is a legally binding agreement between the principal (the party performing the obligation), the surety (the party providing the guarantee), and the obligee (the party benefiting from the guarantee). The bond ensures that the principal fulfills their contractual obligations, and if they fail to do so, the surety will compensate the obligee for any resulting losses.

A surety underwriter is an individual or representative of a surety company who assesses the risk associated with providing a contract surety bond. The underwriter evaluates the contractor's financial strength, experience, track record, and capacity to perform the contract.