Pancyprian Accounting flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Accounting equation

Assets equal liabilities plus equity. Every transaction affects at least two elements, so the equation always balances and debits always equal credits in the ledger.

Accrual concept

Revenue is recognised when earned and expenses when incurred, not when cash moves. Unpaid expenses are accruals (liabilities); paid-ahead expenses are prepayments (assets).

IAS 2 inventory measurement

Inventory is measured at the lower of cost and net realisable value. Permitted cost formulas are FIFO and weighted average; LIFO is not allowed under IFRS.

IFRS 15 five-step model

Identify the contract, identify performance obligations, determine the transaction price, allocate it to obligations, and recognise revenue when each obligation is satisfied.

Revaluation surplus

Under IAS 16, an increase in carrying amount above cost is credited to other comprehensive income as a revaluation surplus, not to profit or loss.

Prime cost

The sum of direct materials, direct labour, and direct expenses attributable to a product. It excludes production overhead, which is added to give production cost.

Break-even point

The activity level at which total contribution equals fixed costs and profit is zero. In units it equals fixed costs divided by contribution per unit.

High-low method

A technique separating fixed and variable costs: variable cost per unit equals the change in total cost divided by the change in activity between the highest and lowest periods.

Overhead absorption rate

Budgeted production overhead divided by the budgeted absorption base, such as labour hours or machine hours, used to charge overhead into product costs.

Relevant cost

A future, incremental cash flow that differs between alternatives. Sunk costs and committed fixed costs are irrelevant and are excluded from decision making.

Material usage variance

Standard quantity for actual output minus actual quantity used, multiplied by standard price. An adverse variance means more material was used than the standard allows.

Cyprus corporate tax rate

The standard corporate income tax rate in Cyprus is 12.5%. Resident companies are taxed on worldwide profits; non-resident companies on Cyprus-source profits only.

Cyprus company residence

A company is tax resident in Cyprus when its management and control are exercised in Cyprus, which brings its worldwide income into the Cyprus tax net.

Notional interest deduction

A Cyprus tax deduction on new equity capital introduced into a company, calculated by reference to a reference bond yield plus a premium, subject to conditions.

Cyprus VAT standard rate

The standard VAT rate in Cyprus is 19%. Reduced rates of 9%, 5%, and 3% apply to specified goods and services, and registration is compulsory above the turnover threshold.

Cyprus capital gains tax

A 20% tax on gains from disposing of immovable property in Cyprus and shares in companies owning it, with indexation and lifetime exemptions available.

Audit risk model

Audit risk equals inherent risk times control risk times detection risk. The auditor influences detection risk through the nature, timing, and extent of audit procedures.

ISA 700 unmodified opinion

The auditor concludes the financial statements give a true and fair view and are prepared, in all material respects, in accordance with the applicable financial reporting framework.

Modified audit opinion

Under ISA 705 the auditor issues a qualified opinion, an adverse opinion, or a disclaimer of opinion when misstatements or scope limitations are material or pervasive.

Going concern assessment

Under ISA 570 the auditor evaluates management's assessment covering at least twelve months from the reporting date and reports material uncertainty in a separate section.

Performance materiality

An amount set below overall materiality to reduce the probability that uncorrected and undetected misstatements together exceed materiality for the financial statements as a whole.

Separate legal personality

On registration under Cap. 113 a Cyprus company becomes a legal person distinct from its members, so shareholders are generally liable only up to unpaid share capital.

Directors' fiduciary duties

Directors must act in good faith in the company's interests, exercise powers for proper purposes, avoid conflicts, and apply due care, skill, and diligence.

Issued versus paid-up capital

Issued capital is the nominal value of shares actually allotted to shareholders; paid-up capital is the portion of that nominal value already received by the company.

Apparent authority

Where a principal represents that an agent has authority, the principal is bound by the agent's acts within that representation, even if actual authority is absent.

Net present value

The present value of a project's future cash inflows minus the initial investment, discounted at the cost of capital. Positive NPV means the project adds value.

Weighted average cost of capital

The blended required return on a firm's equity and debt, weighted by market values, with interest on debt adjusted for the tax shield.

Cash operating cycle

Inventory days plus receivable days minus payable days. A shorter cycle reduces the working capital that must be financed by the business.

Segregation of duties

A control principle that no single person should authorise, record, and custody the same transaction, reducing the risk of error and fraud going undetected.

Input validation controls

Checks applied as data is entered, such as range, format, check digit, and reasonableness tests, to prevent inaccurate data entering the accounting system.

General IT controls

Controls over the IT environment as a whole, covering access security, change management, backup and recovery, and physical security of systems and data.

IESBA fundamental principles

Integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Threats to these must be identified and safeguarded against.