WACE Accounting Finance ATAR key terms

An accounting method that records revenue when it is earned and expenses when they are incurred, regardless of when cash actually changes hands.

The rule that expenses are recognised in the same reporting period as the revenue they helped to generate, so profit reflects the true effort of earning income.

An amount paid in advance for goods or services not yet received, recorded as a current asset until the benefit is consumed.

A cost that has been incurred but not yet paid or invoiced at the reporting date, recorded as a current liability until settled.

The systematic allocation of an asset's depreciable cost over its useful life, reflecting the consumption of economic benefits through use or obsolescence.

A depreciation approach that spreads the depreciable cost of an asset evenly across each year of its expected useful life.

The value of an asset shown in the statement of financial position, calculated as its original cost less accumulated depreciation and any impairment.

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

The book of original entry where transactions are first recorded chronologically as debits and credits with a narration explaining each entry.

A numbered and classified list of every account a business uses, organising assets, liabilities, equity, income and expenses for consistent recording and reporting.

Sales revenue minus variable costs, representing the amount available to cover fixed costs and then generate profit.

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

An expense that stays constant in total over a relevant range of activity, such as rent, regardless of how many units are produced or sold.

A cost that changes in total in direct proportion to changes in activity level, while remaining constant per unit produced or sold.

A costing method that assigns all manufacturing costs, including fixed overhead, to products, as required for external financial reporting.

A costing method that assigns only variable manufacturing costs to products, treating fixed overhead as a period expense; useful for internal decisions.

Indirect manufacturing costs such as factory rent, supervision and utilities that cannot be traced directly to a specific unit of product.

The process of assigning indirect costs to cost objects or departments using a logical basis such as labour hours or machine hours.

A costing approach that assigns overhead to products based on the activities that drive those costs, giving more accurate product costs than a single rate.

The difference between a budgeted figure and the actual result, analysed as favourable or unfavourable to explain performance and guide corrective action.

A forecast of expected cash receipts and payments over a period, used to plan liquidity and identify future funding needs or surpluses.

Gross profit divided by sales revenue, expressed as a percentage, showing how much of each sales dollar remains after cost of goods sold.

Net profit after tax divided by sales revenue, expressed as a percentage, indicating overall profitability from each dollar of sales.

Net profit after tax divided by average shareholders' equity, measuring how effectively the owners' invested funds have been used to generate profit.

Current assets divided by current liabilities, indicating whether a business can meet its short-term obligations from short-term resources.

The ability of a business to convert assets into cash quickly enough to meet obligations as they fall due.

A measure comparing borrowed funds to total capital or equity, showing the proportion of financing provided by lenders rather than owners.

The blended required return on a firm's debt and equity, weighted by their proportions, used as the discount rate in investment appraisal.

The sum of a project's future cash flows discounted to present value at the required rate, minus the initial outlay; a positive result suggests acceptance.

An appraisal technique that converts future cash inflows and outflows into today's dollars using a required rate of return that reflects risk and time.

The time required for cumulative cash inflows from a project to recover the initial investment outlay, emphasising liquidity rather than long-term profitability.

The excess of current assets over current liabilities, representing funds tied up in day-to-day operations and available for short-term needs.

Funds raised by issuing shares or retaining profits, which carry ownership rights but no fixed obligation to repay or pay dividends.

Borrowed funds such as loans, debentures or notes that must be repaid with interest, creating a fixed obligation regardless of profits.

Australia's central bank, responsible for monetary policy, financial system stability and issuing currency to influence interest rates and inflation.

Central bank actions that adjust the cash rate and money supply to influence borrowing, spending, inflation and employment across the economy.

The primary Australian market where listed companies' shares and other securities are traded, providing liquidity and price discovery for investors.

Interest calculated on both the original principal and previously accumulated interest, causing savings or debts to grow at an accelerating rate.

The value today of a future sum of money, found by discounting it at an appropriate interest rate to reflect time and risk.

The value of the next best alternative given up when a decision is made, forming a key cost in both personal and business choices.

Choosing actions guided by honesty, fairness, integrity and consideration of stakeholders, beyond merely what is legal or profitable.

The systems, rules and practices by which a company is directed and controlled, balancing stakeholder interests and ensuring accountability of management.