Pancyprian Accounting key terms

A method that records income and expenses in the period they are earned or incurred, regardless of when cash actually moves, giving a truer picture of financial performance than cash receipts alone.

The rule that expenses are recognised in the same reporting period as the revenues they helped generate, so profit is measured by pairing related income and cost rather than by timing of payment.

A cost incurred during the period but not yet invoiced or paid, such as unpaid wages or electricity used but not billed, recorded as a liability and an expense at the year end.

Revenue earned in the period but not yet invoiced or received, such as interest due on a deposit, recorded as a receivable and as income in the current period.

An amount paid in one period for benefits that relate to a later period, such as rent paid in advance, carried forward as an asset until the benefit is consumed.

The systematic allocation of the depreciable amount of a non-current asset over its useful life, reflecting consumption of economic benefits rather than changes in market value.

The estimated amount an entity would currently obtain from disposing of an asset, after deducting expected disposal costs, if the asset were already of the age and condition expected at the end of its useful life.

A depreciation approach charging an equal amount each year, calculated as cost less residual value divided by useful life, suited to assets whose benefits are consumed evenly.

A reduction in the recoverable amount of an asset below its carrying amount, requiring a write-down and recognition of a loss in profit or loss.

The amount at which an asset or liability is recognised in the statement of financial position, being cost less accumulated depreciation and accumulated impairment losses for a non-current asset.

A listing of all ledger balances at a date, split between debits and credits, used to check that total debits equal total credits before preparing financial statements.

A temporary account holding the difference when a trial balance does not agree, later cleared by locating and correcting the underlying error.

A record of a transaction showing the accounts debited and credited with equal amounts, together with a narrative explaining the reason for the entry.

Sales revenue less 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 equals total fixed costs so the business makes neither profit nor loss.

The excess of budgeted or actual sales over the break-even sales level, showing how far sales can fall before a loss arises; often expressed as a percentage.

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 cost written off in full against contribution.

A predetermined rate used to charge production overheads to output, typically total budgeted overhead divided by budgeted activity such as labour hours or machine hours.

The difference between overhead actually incurred and overhead absorbed into production using a predetermined rate; under-absorption means too little was charged, over-absorption too much.

A system that sets predetermined costs and revenues for products, then compares actual results against those standards to highlight variances for management action.

The process of calculating and interpreting differences between budgeted or standard figures and actual figures, separating causes such as price, usage and volume effects.

A budget adjusted to the actual level of activity achieved, allowing fair comparison of costs with actual results by removing volume effects from variances.

The profit figure on which Cyprus income tax is charged, being accounting profit adjusted for items that are exempt, non-deductible or subject to special allowances and deductions.

The status determining which country may tax a person or company on worldwide income; in Cyprus a company is resident where its management and control are exercised.

A fixed place of business through which a non-resident carries on business in a country, giving that country taxing rights over the profits attributable to it under a double tax treaty.

Tax deducted at source by the payer on certain payments such as dividends, interest or royalties, and remitted to the tax authority on behalf of the recipient.

Tax deductions spread over time for the cost of qualifying capital assets, replacing accounting depreciation in the tax computation because depreciation itself is not deductible.

The threshold or magnitude of misstatement above which users' decisions could be affected; auditors use it to plan procedures and judge whether errors require correction.

The risk that the auditor expresses an inappropriate opinion on financial statements that are materially misstated, comprising inherent, control and detection risk components.

Information used by the auditor to reach conclusions on which the opinion is based; it must be sufficient in quantity and appropriate in relevance and reliability.

The policies and procedures designed by management to safeguard assets, ensure reliable reporting and promote compliance with laws and regulations.

An internal control principle separating authorisation, custody of assets and record-keeping among different people so no single person can both commit and conceal an error or fraud.

The audit reporting conclusion that financial statements are presented faithfully, free from material misstatement and in accordance with the applicable financial reporting framework.

The principle that a registered company is a legal person distinct from its shareholders, able to own property, contract and sue in its own name.

The protection that shareholders of a limited company can lose only the amount unpaid on their shares, not their personal assets, for the company's debts.

A constitutional document stating a company's name, registered office, objects and, for companies limited by shares, the authorised share capital and initial subscribers.

The internal rulebook governing a company's management, share transfers, meetings and directors' powers, forming a contract between the company and its members.

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

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 time taken for cumulative cash inflows from a project to equal the initial outlay, used as a simple measure of liquidity and risk rather than profitability.

The rate used to convert future cash flows into present value, usually reflecting the cost of capital and the risk of the cash flows concerned.

The excess of current assets over current liabilities, measuring the short-term funds available to run day-to-day operations after meeting obligations falling due within a year.

A measure such as the current or quick ratio comparing short-term assets with short-term liabilities to assess whether a business can meet obligations as they fall due.

A projection of expected cash receipts and payments over future periods, used to anticipate surpluses, identify funding needs and plan short-term liquidity.

Safeguards built into computerised accounting software, such as access rights, validation checks and audit trails, to ensure data integrity and prevent unauthorised changes.

A chronological record in an information system that logs who entered or changed each transaction and when, supporting verification, fraud investigation and audit testing.

The accuracy, completeness and consistency of stored accounting data throughout its life, protected by validation rules, backups and restricted access.

The use of accounting software hosted on remote servers and accessed over the internet, offering real-time data sharing but raising questions about data security and location.

The state of being free from relationships or interests that could compromise objectivity, required of auditors in both fact and appearance so opinions are unbiased.

The ethical principle requiring a professional accountant not to let bias, conflict of interest or undue influence of others override professional judgements and decisions.

An ethical threat arising where a financial or other interest, such as a fee dependency or shareholding, improperly influences the accountant's judgement or behaviour.

The ethical duty not to disclose information acquired through professional work without proper authority, unless there is a legal or professional right or duty to do so.

The system of rules, practices and processes by which a company is directed and controlled, balancing the interests of shareholders, directors and other stakeholders.

A committee of independent non-executive directors overseeing financial reporting, internal controls and the external audit relationship, strengthening accountability to shareholders.