BCS Written Accounting key terms

An accounting method where revenues are recorded when earned and expenses when incurred, regardless of when cash is received or paid, providing a more accurate picture of financial performance.

The assumption that a business will continue operating for the foreseeable future, allowing assets and liabilities to be recorded on a basis other than liquidation values.

The accounting rule that expenses should be recognized in the same period as the revenues they help generate, ensuring accurate profit measurement.

The systematic allocation of the cost of a tangible fixed asset over its useful life, reflecting consumption of economic benefits.

The gradual write-off of the cost of an intangible asset over its estimated useful life, similar to depreciation for physical assets.

A reduction in the recoverable amount of an asset below its carrying amount, requiring a write-down to reflect the loss in value.

A liability of uncertain timing or amount recognized when a present obligation exists from a past event and a reliable estimate can be made.

A potential obligation that arises from past events and whose existence will be confirmed only by uncertain future events not wholly within the entity's control.

The difference between current assets and current liabilities, representing the funds available for day-to-day operations.

A liquidity metric calculated as current assets divided by current liabilities, indicating a company's ability to pay short-term obligations.

A stringent liquidity measure that excludes inventory from current assets and divides the remainder by current liabilities, testing immediate solvency.

The length of time between paying for inventory and collecting cash from sales, calculated as days inventory outstanding plus days sales outstanding minus days payables outstanding.

The difference between the present value of cash inflows and outflows of a project, used to assess profitability; a positive NPV indicates a viable investment.

The discount rate that makes the net present value of a project's cash flows equal to zero, representing the project's expected annual return.

The time required for cumulative cash inflows from an investment to equal the initial cash outflow, used as a simple risk indicator.

The average rate a company expects to pay to finance its assets, calculated by weighting the cost of each capital component by its proportion in the capital structure.

A costing method that assigns overhead costs to products or services based on the activities that drive those costs, improving accuracy over traditional allocation.

A costing technique that considers only variable costs as product costs, treating fixed costs as period expenses, useful for short-term decision making.

A costing method that includes all manufacturing costs-direct materials, direct labor, and both variable and fixed overhead-in the cost of a product.

The amount remaining from sales revenue after variable costs are deducted, which contributes to covering fixed costs and generating profit.

The level of sales at which total revenues equal total costs, resulting in neither profit nor loss.

A system that compares actual costs with predetermined standard costs to identify variances and improve cost control.

The process of comparing actual financial performance to budgeted or standard figures to understand deviations and their causes.

A budget that adjusts for changes in activity level, allowing actual costs to be compared with what costs should have been at that actual volume.

The concept that information is material if its omission or misstatement could influence the economic decisions of users of financial statements.

The risk that an auditor expresses an inappropriate opinion on financial statements that are materially misstated.

The susceptibility of an assertion to material misstatement before considering the effectiveness of internal controls.

The risk that a material misstatement will not be prevented or detected on a timely basis by the entity's internal controls.

An attitude of questioning and critical assessment of audit evidence, remaining alert to conditions indicating possible misstatement due to error or fraud.

The policies and procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the effectiveness of operations.

The use of legal methods to minimize tax liability by taking advantage of allowances, deductions, and exemptions within the tax law.

The illegal non-payment or underpayment of tax through deliberate concealment or misrepresentation of income or expenses.

A consumption tax levied on the value added at each stage of production and distribution, ultimately borne by the final consumer.

The mechanism under VAT allowing businesses to offset tax paid on purchases against tax collected on sales, avoiding double taxation.

The system of rules, practices, and processes by which a company is directed and controlled, balancing stakeholder interests.

A legal obligation of directors and officers to act in the best interests of the company, exercising care, loyalty, and good faith.

A transfer of resources or obligations between a company and a party with a close relationship, which may present conflicts of interest and require disclosure.

An accounting system used by non-profit and government entities that segregates resources into funds according to restrictions or purposes.

A basis of accounting that recognizes revenues when measurable and available, and expenditures when the liability is incurred, commonly used in governmental funds.

The process of comparing actual financial performance against budgeted figures and taking corrective action to achieve financial goals.

Integrated software systems that manage core business processes such as accounting, inventory, and human resources across an organization.

The combination of people, processes, data, and technology used to collect, store, and report financial information.