Glossary terms starting with P

Partner Admission

Partner admission is bringing a new owner into a partnership, whether by contributing capital, buying an interest from an existing partner, or receiving an interest as compensation.

Partner Buyout

A partner buyout is the purchase of a departing partner's interest, either by the firm itself or by the remaining partners individually.

Partner Compensation

Partner compensation is how a professional firm pays its partners, usually through a mix of fixed draws, guaranteed payments, and a share of profits.

Partner Draw

A partner draw is money withdrawn from a partnership by a partner for personal use.

Partnership

A partnership is a business owned by two or more people who share in its profits and losses.

Pass-Through Entity

A pass-through entity is a business whose income is reported on its owners' tax returns instead of being taxed at the entity level.

Pass-Through Expense

A pass-through expense is a cost incurred on behalf of a client and billed back without markup.

Passive Loss

A passive loss is a tax loss from a business activity in which you do not materially participate.

Past Due Notice

A past due notice is a reminder sent to customers that their invoice payment is overdue.

Pay Period

A pay period is the recurring time frame for which employee wages are calculated and paid, such as weekly, bi-weekly, semi-monthly, or monthly.

Pay Stub

A pay stub is a document provided to employees with each paycheck detailing gross wages, deductions, taxes withheld, and net pay for the current period and year to date.

Payment Allocation

Payment allocation is the process of applying client payments to specific open invoices and determining which invoices are considered paid when a client pays less than the total amount owed or does not specify invoice application.

Payment Terms

Payment terms specify when the client's payment is due relative to the invoice date, commonly expressed as Net-15, Net-30, or Net-45 (payment due 15, 30, or 45 days after the invoice).

Payroll Liability

Payroll liability represents amounts owed but not yet paid related to employee compensation, including accrued wages, withheld taxes, and employer tax obligations.

Payroll Accrual

A payroll accrual is an accounting entry that recognizes wages and related expenses earned by employees but not yet paid at period-end.

Payroll Audit

A payroll audit is a review of payroll records, processes, and compliance.

Payroll Burden Rate

Payroll burden rate is the extra cost an employer pays on top of gross wages, shown as a percentage of wages.

Payroll Deduction

A payroll deduction is any amount withheld from an employee's gross wages, including taxes, benefits, retirement contributions, garnishments, and other authorized withholdings.

Payroll Expense

Payroll expense represents the total cost of employee compensation, including gross wages, employer payroll taxes, and employer-paid benefits.

Payroll Expense Ratio

Payroll expense ratio measures total payroll costs as a percentage of revenue, indicating how much of each revenue dollar goes to employee compensation.

Payroll Frequency

Payroll frequency is how often a business pays its employees, such as weekly, biweekly, semimonthly, or monthly.

Payroll Integration

Payroll integration connects payroll processing systems (like Gusto, ADP, or Rippling) directly to accounting software, automating the recording of wages, taxes, benefits, and liabilities without manual journal entries.

Payroll Journal Entry

A payroll journal entry is the accounting entry recording wages expense, employer payroll taxes, withholdings payable, and net pay for a pay period.

Payroll nexus

Payroll nexus is the tax obligation created in a state because you have an employee working there.

Payroll processing

Payroll processing is the administration of employee compensation, including calculating wages, withholding taxes, managing deductions, and ensuring timely payment to employees and tax authorities.

Payroll Provider

A payroll provider is a company or service that processes payroll on behalf of businesses, handling wage calculations, tax withholding, deposits, filings, and often direct deposit and reporting.

Payroll Register

A payroll register is a report that lists every employee's gross pay, deductions, taxes withheld, and net pay for a pay period.

Payroll Setup

Payroll setup is the initial configuration required before running payroll for the first time or transitioning to a new payroll system.

Payroll Summary Report

A payroll summary report consolidates payroll data for a pay period or range of periods, showing total gross wages, deductions by type, employer taxes, and net pay across all employees.

Payroll Tax Reconciliation

Payroll tax reconciliation is the process of comparing payroll records, tax deposits, and tax returns to ensure all amounts agree and identify any discrepancies before filing annual returns.

Payroll taxes

Payroll taxes are taxes withheld from employee paychecks and paid by employers based on employee compensation.

Penalty Abatement

Penalty abatement is the removal or reduction of IRS penalties.

Per Diem

Per diem is a daily allowance paid to employees for travel expenses instead of reimbursing actual costs.

Percentage of Completion Method

The percentage of completion method recognizes revenue on a long project in proportion to how much of the work has been completed during each period.

Period Close

Period close is the process of finalizing accounting records for a period, ensuring all transactions are recorded, adjustments are made, and the period is locked from further changes.

Permanent Difference

A permanent difference is a gap between book income and tax income that will never reverse.

Petty Cash

Petty cash is a small amount of physical cash a business keeps on hand to pay minor expenses, such as postage, parking, or office supplies, where writing a check or using a card is not practical.

Phantom Income

Phantom income is taxable income you must report even though you received no cash.

Phase Billing

Phase billing structures an engagement into distinct phases, each with its own scope, budget, and billing event.

Pipeline Coverage Ratio

Pipeline coverage ratio measures the value of sales opportunities in your pipeline relative to your revenue target, indicating whether you have sufficient opportunities to achieve your goals given expected win rates.

Positive Pay

Positive pay is a fraud prevention service where businesses submit a file of authorized checks to their bank.

Practice Entity

A practice entity is the business structure through which a professional delivers services.

Pre-Tax Deduction

A pre-tax deduction is an amount withheld from wages before income taxes are calculated, reducing taxable income and current tax liability.

Prepaid Expenses

Prepaid expenses are payments made in advance for goods or services that will be used in future periods, such as insurance, software subscriptions, or rent.

Prepayment

A prepayment is money paid before receiving goods or services.

Pricing Strategy

Pricing strategy is the approach a business uses to set prices for its services.

Processing Fee

A processing fee is any charge for handling a transaction, commonly applied to payment processing, payroll services, and financial transactions.

Productivity Ratio

Productivity ratio measures billable hours as a percentage of total available working hours, indicating how much of staff time generates revenue versus administrative, business development, or other non-billable activities.

Professional Corporation

A professional corporation is a corporate entity type designed for licensed professionals like lawyers, doctors, accountants, and engineers.

Professional Liability Insurance

Professional liability insurance protects a business or individual against claims that their professional work was negligent, mistaken, or failed to meet the client's expectations.

Professional LLC

A professional LLC is a limited liability company formed by licensed professionals.

Profit Allocation

Profit allocation is the process of dividing partnership or LLC income among owners for tax purposes.

Profit and loss statement (P&L)

The Profit and Loss Statement (P&L), also called an Income Statement, shows your business's revenues, expenses, and resulting profit or loss over a specific period (month, quarter, year).

Profit Center

A profit center is a business unit or segment for which both revenue and expenses are tracked, enabling profitability to be measured as a standalone entity.

Profit Margin Analysis

Profit margin analysis examines profitability at multiple levels, including gross margin (revenue minus direct costs), operating margin (revenue minus all operating expenses), and net margin (bottom-line profit).

Profit Margin By Client

Profit margin by client compares the revenue from each client with the full cost of serving them, shown as a percentage.

Profit Per Employee

Profit per employee calculates the average profit generated by each employee, determined by dividing net profit by total headcount.

Profit Per Partner

Profit per partner is a measure professional firms use to show how much profit is available to each equity partner.

Profit Sharing

Profit sharing is a compensation arrangement in which employees receive a portion of the firm's profits beyond their base salary, typically distributed annually according to a formula.

Profitability Waterfall

A profitability waterfall is a visual representation showing how revenue flows through successive cost layers to arrive at profit.

Progress Billing

Progress billing invoices clients for work as it is completed rather than waiting until project completion.

Progress Invoice

A progress invoice bills clients for work completed during a period rather than waiting until project completion.

Progress Payment

A progress payment is a partial payment made during a project based on work completed to date rather than upon reaching a specific milestone.

Project Budget Variance

Project budget variance measures the difference between planned and actual costs or hours on a consulting engagement, expressed as a percentage or dollar amount.

Project Costing

Project costing tracks all costs associated with a specific client engagement or project.

Project Margin

Project margin is the profit a project earns after subtracting its direct costs from the revenue it generates, usually shown as a percentage of revenue.

Project profitability

Project profitability measures the profit generated by individual client projects or engagements, calculated as project revenue minus project costs (direct labor, contractors, expenses).

Project-Level P&L

A project-level P&L (profit and loss statement) calculates the profitability of individual consulting engagements by matching project revenue against direct costs (labor, expenses, subcontractors) and allocated overhead.

Proposal Win Rate

Proposal win rate measures the percentage of submitted proposals that convert to signed engagements.

PTE Election

A PTE election lets a partnership or S corporation pay state income tax at the entity level instead of passing it to owners, creating a federal deduction the owners could not otherwise claim.

PTO Accrual

PTO accrual is the recording of paid time off that employees have earned but not yet used.

PTO Payout

PTO payout is compensation paid to employees for unused paid time off, typically at termination.

Purchase Order

A purchase order (PO) is a document a buyer sends a vendor to authorize a purchase and set the quantity, price, and terms.