CS Professional CMADD key terms

A tax payable by companies whose normal tax liability, after adjustments, falls below a specified percentage of book profit, ensuring that profitable companies with large exemptions still contribute tax.

The adjusted accounting profit computed under the income-tax law for MAT purposes, starting from net profit as per statement of profit and loss with prescribed additions and reductions.

Arranging commercial and financial affairs within the framework of law to reduce tax liability legitimately, using deductions, exemptions, and timing choices without concealment or artificial devices.

Using legally permitted arrangements whose primary purpose is to obtain a tax benefit, often exploiting gaps in the law; may attract general anti-avoidance provisions if lacking commercial substance.

Illegally reducing tax liability by suppressing income, inflating expenses, or misrepresenting facts, exposing the assessee to penalties and prosecution under the income-tax law.

Statutory provisions allowing tax authorities to disregard impermissible avoidance arrangements that lack commercial substance or create rights not ordinarily arising, and to recharacterise or deny the resulting tax benefit.

The pricing of transactions between associated enterprises, which must be at arm's length; the law prescribes methods to determine and adjust the income arising from such international or specified domestic transactions.

The price charged or paid in an uncontrolled transaction between unrelated parties, used as the benchmark against which related-party transaction prices are tested and adjusted under transfer pricing rules.

An entity related to another through participation in management, control, or capital, or through common control, as defined in the transfer pricing provisions of the income-tax law.

A written determination by an authority on the tax consequences of a proposed transaction, binding on the applicant and the revenue, sought to reduce uncertainty before entering into the arrangement.

The credit a registered person may claim for tax paid on inward supplies of goods or services used for business, set off against output tax liability subject to statutory conditions and restrictions.

The tax charged by a registered supplier on outward supplies of goods or services, which is deposited after adjusting eligible input tax credit available in the electronic credit ledger.

A system in which the recipient of specified goods or services, rather than the supplier, is liable to pay tax, and such tax paid is generally available as input tax credit.

A digital account maintained for a registered person in which input tax credit is credited and from which permissible utilisation towards output tax liability is debited.

The statutory location determining which state or territory a transaction belongs to for tax purposes, especially critical for cross-border and inter-state supplies of goods and services.

The point at which a taxable event is deemed to occur, fixing when tax becomes payable and when the recipient may claim input tax credit, based on invoice, payment, or completion of supply.

Supply of goods or services on which no tax is charged but input tax credit remains available, typically exports and supplies to special economic zones, unlike exempt supplies.

Supply of goods or services that attracts nil rate of tax or is wholly exempt, with no output tax charged and generally no input tax credit available on related inputs.

An electronic document required to accompany the movement of goods above a prescribed value, evidencing the consignment and enabling verification of tax compliance during transit.

Financial statements presenting the assets, liabilities, income, and expenses of a parent and its subsidiaries as those of a single economic entity, eliminating intragroup balances and transactions.

The portion of a subsidiary's equity and profit or loss that is not attributable to the parent, presented separately within consolidated equity and results.

The excess of consideration transferred plus the non-controlling interest and previously held interest over the fair value of identifiable net assets acquired, recognised as an asset in consolidated statements.

A transaction in which an acquirer obtains control of one or more businesses, accounted for using the acquisition method with recognition of identifiable assets and liabilities at fair value.

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The amount by which the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, recognised in profit or loss and allocated across assets of the unit.

A component of an entity engaged in business activities earning revenue and incurring expenses, whose results are regularly reviewed by the chief operating decision maker for resource allocation.

Presentation of relationships, transactions, outstanding balances, and commitments between an entity and its related parties, enabling users to assess the effect of those relationships on the financial statements.

The tax effect of temporary differences between the carrying amount of assets and liabilities and their tax bases, recognised as deferred tax assets or liabilities and reviewed for recoverability.

Sales revenue less variable costs, representing the amount available to cover fixed costs and generate profit; a core input for cost-volume-profit and break-even analysis.

The level of sales at which total revenue equals total cost, yielding neither profit nor loss; computed by dividing fixed costs by contribution per unit or contribution-to-sales ratio.

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

A technique of setting predetermined costs for materials, labour, and overheads, then comparing them with actual costs to analyse variances and improve cost control.

The process of decomposing the difference between standard and actual cost into price and quantity components to identify responsibility, causes, and corrective action.

A costing method that assigns overhead costs to products or services based on the activities they consume, using cost drivers rather than a single volume-based allocation base.

A factor or activity that causes a change in the cost of an activity, used as the basis for allocating overhead costs to cost objects under activity-based costing.

A system that assigns revenues and costs to individual managers or centres accountable for them, enabling performance evaluation through cost, profit, revenue, and investment centre reporting.

The internal price at which one division or segment supplies goods or services to another within the same organisation, affecting divisional performance measurement and goal congruence.

A future cost that differs between alternatives and is therefore useful for decision-making; sunk costs and unavoidable fixed costs are excluded from such analysis.

A statement presenting an entity's assets, liabilities, and equity at a point in time, reflecting the accounting equation and classified into current and non-current categories.

A financial statement summarising revenues, expenses, and resulting profit or loss for an accounting period, prepared to explain performance to stakeholders.

A statement classifying cash movements into operating, investing, and financing activities, reconciling opening and closing cash balances and explaining liquidity generation.

The excess of current assets over current liabilities, measuring short-term liquidity and the funds needed to finance day-to-day operations of a business.

The weighted average rate of return required by providers of debt and equity finance, used as the discount rate for investment appraisal and valuation decisions.