TASC Accounting Level 3 key terms

An accounting approach that records income when it is earned and expenses when they are incurred, regardless of when cash actually moves, giving a more faithful picture of performance than cash receipts alone.

The rule that expenses are reported in the same period as the revenues they helped generate, so profit for a period reflects the costs consumed to earn that period's income.

A cost that has been incurred but not yet invoiced or paid at the reporting date, such as unpaid wages, so a liability and an expense are recognised in the current period.

An amount paid in advance for goods or services not yet received, shown as a current asset until the benefit is consumed and the cost is charged to the income statement.

The systematic allocation of the cost of a tangible non-current asset over its useful life, spreading the expense across the periods that benefit from the asset's use.

The value at which an asset or liability appears in the statement of financial position, being original cost less accumulated depreciation and any accumulated impairment losses.

A reduction in the recoverable value of an asset below its carrying amount, requiring a write-down and an immediate charge to profit or loss when evidence of the loss exists.

A listing of all ledger account balances at a point in time, used to check that total debits equal total credits before financial statements are prepared.

A recording system in which every transaction is entered twice, as an equal debit and credit, so the accounting equation stays in balance and errors are easier to detect.

The initial record of a transaction showing the date, accounts affected, amounts debited and credited, and a brief narrative explaining why the entry was made.

A report at a specific date listing assets, liabilities and equity, demonstrating that resources owned equal the claims of creditors and owners combined.

Sales revenue minus all variable costs, representing the amount available to cover fixed costs and then generate profit; it can be expressed per unit or as a ratio.

The level of sales, in units or revenue, at which total contribution exactly equals total fixed costs, so the business makes neither a profit nor a loss.

The amount by which current or budgeted sales exceed the break-even level, indicating how far sales can fall before the business starts making losses.

A cost that stays broadly unchanged in total over a relevant range of activity, such as rent or salaried management, although it falls per unit as output rises.

A cost that changes in total in direct proportion to changes in activity volume, such as raw materials, while remaining constant per unit within the relevant range.

The band of activity levels over which a cost behaviour pattern, such as a fixed cost staying constant, can reasonably be assumed to hold when making decisions.

A costing method that assigns both variable and fixed production overheads to units produced, so inventory values include a share of fixed manufacturing cost.

A costing method that charges only variable production costs to units, treating fixed production overheads as a period expense, which aligns profit with sales volume.

A predetermined rate used to spread budgeted production overhead across units, based on a measure such as labour hours, machine hours or units of output.

A system that sets expected costs and quantities for products in advance, then compares actual results against those standards to highlight and investigate differences.

The process of calculating and interpreting differences between budgeted or standard figures and actual results, separating causes such as price and usage to guide management action.

A budget restated for the actual level of activity achieved, allowing fair comparison with actual costs by removing volume differences from performance assessment.

The policies, procedures and systems a business uses to safeguard assets, ensure reliable records and support compliance with laws and internal rules.

An internal control that divides tasks so no single person controls a whole transaction from start to finish, reducing the risk of error or fraud going unnoticed.

A monthly comparison of the business's cash records with the bank statement, explaining differences such as unpresented cheques and deposits not yet cleared.

The documented path that lets an item be traced from source documents through the accounting records to the financial statements, and back again, supporting verification.

A stated maximum value or type of transaction that a named employee may approve, ensuring larger or unusual commitments are escalated to more senior staff.

A temporary ledger account holding entries whose correct destination is not yet known, for example when a trial balance does not agree, to be cleared promptly.

The sum of a project's future cash flows discounted to today's value at a chosen rate, less the initial investment; a positive result suggests the project adds value.

The rate used to convert future cash flows into present value, reflecting the time value of money and the risk of the cash flows being evaluated.

The time taken for cumulative cash inflows from an investment to equal the original cash outflow, a simple measure of liquidity and risk that ignores cash flows after that point.

The discount rate at which a project's net present value equals zero, representing the annual return the investment is expected to earn over its life.

The excess of current assets over current liabilities, measuring the short-term funds available to keep day-to-day operations running smoothly.

Current assets divided by current liabilities, showing whether a business holds enough short-term resources to settle obligations falling due within a year.

A projection of expected cash receipts and payments over future periods, used to anticipate shortages or surpluses and plan borrowing or investment in advance.

The proportion of a company's capital financed by debt rather than equity, indicating financial risk because interest and repayment obligations apply regardless of profit.

The weighted average return a business must earn on its investments to satisfy lenders and shareholders, commonly used as the minimum acceptance rate for projects.