Cameroon GCE A-Level Accounting key terms

Accounting rule that revenue and expenses are recognised in the period they relate to, not when cash moves, so profit reflects the activity of the period regardless of payment timing.

Convention requiring accountants to exercise caution when judging under uncertainty, recognising losses and liabilities as soon as they are foreseen but not anticipating profits before they are realised.

Assumption that the entity will continue operating for the foreseeable future, justifying carrying non-current assets at cost less depreciation rather than at break-up values.

Convention that an entity applies the same accounting policies and methods from period to period, so that figures in successive financial statements remain comparable unless a change is disclosed and justified.

Principle that the business is treated as separate from its owners, so owner withdrawals and private assets are recorded as drawings or capital rather than as business income or expenses.

Measurement basis recording assets at the amount originally paid for them, rather than at current market or replacement value, giving verifiable but potentially outdated figures.

The first records in which transactions are entered before posting to the ledger: sales day book, purchases day book, returns books, cash book and the general journal.

Book of prime entry used for transactions that do not fit the other day books, such as corrections of error, opening entries, asset disposals and adjustments, showing debits and credits with narration.

Temporary ledger account opened to hold the difference when a trial balance fails to agree, cleared once the underlying errors are found and corrected.

Mistake where a transaction is entered in the wrong class of account, for example capital expenditure debited to repairs, so the trial balance still balances despite the wrong treatment.

Two or more separate errors that cancel each other's effect on the trial balance totals, so the trial balance agrees even though individual ledger balances are wrong.

Statement starting from the bank statement balance and adjusting for unpresented cheques, uncredited deposits and bank errors to arrive at the cash book balance, explaining why the two differ.

Cheques issued and recorded in the cash book but not yet cleared through the bank by the time the bank statement is produced, so the bank balance is higher than the cash book.

Summary ledger account containing the totals of many individual debtor or creditor accounts, checked against the list of balances to detect posting and arithmetic errors.

Offsetting entry made in both the sales ledger and purchases ledger control accounts when the same party is both a customer and a supplier, cancelling the two balances without cash movement.

Estimated amount of receivables expected to be irrecoverable, charged to profit or loss and deducted from trade receivables in the statement of financial position.

Receivable balance removed from the books as irrecoverable, charged as an expense in the period the debt is judged worthless, with any later recovery credited to bad debts recovered.

Cash, goods or other assets taken from the business by the owner for personal use, deducted from capital rather than treated as an expense of the business.

Account in a partnership or company showing how profit for the year is divided: interest on capital, partners' salaries, interest on drawings, and the residual share to each partner.

Account recording a partner's share of profits, drawings, interest on capital and salary, separate from the fixed capital account, so capital stays unchanged unless introduced or withdrawn.

Value of an established firm's reputation and customer base, brought in when a new partner joins so existing partners are compensated for sharing future profits.

Long-term loan to a company, usually secured on assets and paying fixed interest, shown as a non-current liability rather than as part of shareholders' equity.

Amount received on issuing shares above their nominal value, recorded in a share premium account within equity and not distributable as dividend under most company laws.

Free shares issued to existing shareholders by capitalising reserves such as share premium or retained earnings, increasing share capital without raising new cash.

Account calculating cost of goods produced: direct materials consumed, direct labour, direct expenses and production overheads, adjusted for work in progress, with the result transferred to the trading account.

Partly completed units or unfinished production at the period end, valued at cost and deducted from total manufacturing cost so only finished output is transferred to the trading account.

Systematic allocation of the depreciable cost of a non-current asset over its useful life, reflecting consumption of economic benefit rather than a fall in market value.

Depreciation method charging a fixed percentage on the asset's net book value each year, giving higher charges early in the asset's life and a declining charge thereafter.

Temporary account used when a non-current asset is sold, receiving the asset's cost and accumulated depreciation and the sale proceeds, with the balance transferred to profit or loss.

Costing method that assigns both variable and fixed production overheads to units produced, usually through predetermined overhead absorption rates, so inventory includes a share of fixed cost.

Costing method charging only variable costs to units, treating fixed costs as period costs, and using contribution to judge profitability and short-term decisions.

Selling price less variable cost per unit, the amount each unit contributes towards covering fixed costs and then generating profit; used in break-even and limiting-factor decisions.

Level of sales at which total contribution equals fixed costs, so the business makes neither profit nor loss, expressed in units or in revenue.

Statement classifying cash movements into operating, investing and financing activities to explain the change in cash and cash equivalents over the period.

Profit before interest and tax divided by capital employed, showing how efficiently long-term funds have been used to generate operating profit.

Operating profit divided by interest payable, indicating how many times the business could pay its finance costs from current profit; a low figure signals financial risk.

Practice in not-for-profit and public bodies of keeping separate accounts for each fund or grant, so money given for a specific purpose is not spent on general activities.

Summary of cash actually received and paid during a period, used by clubs and public bodies, which ignores accruals and is converted to income and expenditure for the final accounts.

Statement of revenue and expenses on an accruals basis for a non-profit organisation, equivalent to the profit and loss account, with any surplus added to the accumulated fund.