CMA Inter Paper 10 key terms

The maximum amount of share capital a company may issue, as stated in its memorandum of association; issuing beyond it requires alteration of the memorandum and fresh registration.

The portion of called-up share capital that shareholders have actually paid, net of unpaid calls; it appears as a liability-side item in the balance sheet and determines limited liability.

Amounts due from shareholders on allotted shares that remain unpaid after the due date; companies present them as a deduction from called-up capital and may charge interest under the articles.

Cancellation of shares by a company when a shareholder fails to pay calls; the shares may be reissued, and any amount already received is retained subject to the articles and accounting rules.

Amount received on issue of shares or other securities above their face value; it is credited to a separate reserve and can be used only for specified purposes such as bonus issue or buy-back.

Purchase by a company of its own shares from existing shareholders, subject to Companies Act limits and conditions; it reduces share capital and requires a capital redemption reserve in specified cases.

A reserve created when a company redeems preference shares or buys back shares out of profits, representing the amount by which capital is reduced; it is treated as paid-up capital for certain purposes.

Issue of additional shares to existing shareholders without any consideration, funded from free reserves, securities premium or capital redemption reserve; it converts reserves into share capital.

A written acknowledgement of debt issued by a company, usually carrying a fixed rate of interest and secured by a charge on assets; debenture holders are creditors, not owners.

The excess of the face value of debentures over the issue price; it is a capital loss written off against securities premium or statement of profit and loss over the debenture term.

A reserve created out of profits by companies required to do so, to ensure funds are available for redeeming debentures; it is presented under reserves and surplus.

The prescribed format for preparing a company's balance sheet and statement of profit and loss under the Companies Act, 2013, setting out line items, grouping and disclosure requirements.

A possible obligation whose existence depends on uncertain future events, or a present obligation not recognised because outflow is not probable or cannot be measured reliably; disclosed in notes.

A business combination in which all conditions of AS 14 are met, including pooling of interests and continuation of shareholders; assets and liabilities are recorded at carrying amounts.

The consideration payable by a transferee company to shareholders of a transferor company under an amalgamation or absorption, computed by methods such as net assets or net payment.

A method of computing purchase consideration by adding the agreed values of assets taken over and deducting liabilities assumed; the result may be settled in cash or shares.

An intangible asset representing future economic benefits from a business combination that cannot be individually identified; in amalgamation it is the excess of consideration over net assets acquired.

A reserve created from capital profits such as a bargain purchase in amalgamation, forfeiture of shares or revaluation surplus; it is generally not available for dividend distribution.

A company that controls another company, called a subsidiary, through ownership of more than half the voting power or control of the board composition.

The portion of a subsidiary's net assets and profits attributable to shareholders other than the holding company; presented separately in the consolidated balance sheet.

Profits earned by a subsidiary before the parent acquired its shares; they are treated as capital and used in computing goodwill or capital reserve on consolidation.

The difference between the parent's investment cost in a subsidiary and its share of the subsidiary's equity on acquisition; a debit balance is goodwill, a credit balance is capital reserve.

The risk that an auditor expresses an inappropriate opinion on financial statements that are materially misstated; it comprises inherent risk, control risk and detection risk.

The magnitude of an omission or misstatement that, individually or in aggregate, could influence the economic decisions of users; it guides planning, evidence gathering and evaluation of misstatements.

Information used by the auditor to reach conclusions on which the audit opinion is based; it must be sufficient and appropriate and is obtained through inspection, observation, inquiry, confirmation and re-performance.

A detailed schedule of audit procedures to be performed, the timing and the staff responsible; it directs execution and helps ensure that planned work is completed and reviewed.

Records prepared or obtained by the auditor during the audit that document procedures performed, evidence obtained and conclusions reached; they support the audit report and are retained for the required period.

The policies and procedures designed by management to provide reasonable assurance about reliable financial reporting, effectiveness and efficiency of operations and compliance with laws; auditors assess it to plan procedures.

Audit procedures designed to detect material misstatements at the assertion level, including tests of details and substantive analytical procedures; they are performed irrespective of assessed control risk.

The assumption that an entity will continue operating for the foreseeable future without liquidation or cessation; auditors evaluate management's assessment and consider whether a material uncertainty exists.

The Companies (Auditor's Report) Order, which requires auditors of specified companies to report on prescribed matters such as fixed assets, inventories, loans and statutory dues in the audit report.

A formal written opinion by an auditor on whether financial statements give a true and fair view in accordance with the applicable framework; it follows prescribed elements and includes a basis for opinion.

An auditor's opinion stating that, except for the effects of specified matters, the financial statements give a true and fair view; it is issued when misstatements are material but not pervasive.

An auditor's opinion that the financial statements do not give a true and fair view because misstatements are both material and pervasive; it is the most severe modification of an unmodified opinion.

An auditor's statement that no opinion is expressed because sufficient appropriate evidence could not be obtained and the possible effects are material and pervasive.

An independent appraisal function within an entity that evaluates risk management, control and governance processes; it assists management and may be relied on by external auditors after assessment.

An examination of financial records and evidence to detect or investigate fraud, asset misappropriation or financial misconduct, often for use in legal proceedings or disciplinary action.

Review and evaluation of an entity's IT infrastructure, applications, controls and data processing to assess confidentiality, integrity, availability and compliance with policies and regulations.

The underlying assertion that financial statements present a company's financial position and performance honestly and in accordance with the applicable accounting framework, free from material misstatement and bias.