KASNEB ATD key terms

A system of recording transactions so that every one affects at least two accounts, with total debits always equalling total credits, which allows errors to be detected and financial statements to be prepared from the records.

A list of the closing balances of all ledger accounts at a given date, arranged in debit and credit columns, prepared to confirm that total debits equal total credits before statements are drawn up.

The assumption that a business will continue to operate for the foreseeable future, so assets are carried at cost rather than break-up values and long-term items are not written off in one period.

The principle that income and expenses are recognised in the period in which they are earned or incurred, regardless of when cash is received or paid, so reported profit reflects the activity of the period.

The convention of exercising caution in estimates so that assets and income are not overstated and liabilities and expenses are not understated, and unrealised gains are not recognised.

The assumption that a business is separate from its owners for accounting purposes, so the owner's private transactions are excluded from the business records and financial statements.

A definite proposal made by one party to another with the intention of creating a binding agreement once the other party accepts it on the stated terms.

An unqualified agreement to every term of an offer, communicated to the party who made it, which turns the offer into a binding contract.

Something of value, such as money, goods or a promise, given by each party in exchange for what the other provides; it must not relate to something already done.

The doctrine that decisions of higher courts bind lower courts in later similar cases, so legal principles developed in judgments become a recognised source of law.

A written document describing a business idea together with its market, operations, management and financial projections, used to guide the venture and to persuade lenders or investors to provide funds.

Any person or group with an interest in the activities and results of a business, such as owners, employees, customers, suppliers, lenders, government and the local community.

System software that manages a computer's hardware and provides services to application programs, controlling memory, files, input and output and the scheduling of tasks.

A program that attaches itself to other files or programs and spreads without the user's consent, often damaging data or disrupting the normal operation of a computer system.

A statement prepared at a given date explaining the difference between the cash book balance and the bank statement balance, arising from timing differences and errors.

The systematic allocation of the cost of a non-current asset over its useful life, reflecting the consumption of the asset's economic benefits, charged as an expense in each period.

An estimate of the portion of trade receivables that may not be collected, recognised as an expense so that receivables are shown at a realistic amount in the financial statements.

An account prepared after the profit and loss account of a partnership showing how profit is shared: interest on capital, partners' salaries, interest on drawings and the remainder in the agreed ratio.

A measure of central tendency obtained by adding all values in a data set and dividing the total by the number of values; it uses every observation and is affected by extreme values.

A measure of dispersion showing the average distance of individual values from the mean; a larger figure indicates that the observations are more widely spread.

A statistic expressing the value of a variable in one period as a percentage of its value in a chosen base period, used to track changes in prices, quantities or wages over time.

A numerical measure between zero and one of the likelihood that an event will occur, calculated from equally likely outcomes or from observed relative frequencies.

A tax levied on goods and services rather than on income, where the person who pays it may shift the burden to another party, for example value added tax.

A consumption tax charged on the value added at each stage of production and distribution, collected by registered businesses on behalf of the revenue authority, with input tax recoverable against output tax.

A system of collecting income tax from employees at source, in which the employer deducts tax from each salary payment and remits it to the revenue authority on the employee's behalf.

The use of government taxation and spending decisions to influence the level of economic activity, employment and prices in a country.

The number of subordinates who report directly to one manager; a narrow span allows close supervision while a wide span requires greater delegation of authority.

The process by which a manager assigns part of their work and the authority needed to do it to a subordinate, while remaining accountable to their own superiors for the results.

A unit of an organisation, such as a department or a machine, for which costs are separately accumulated and controlled, even though it may not produce a saleable output directly.

The rate used to charge indirect production costs to products, usually calculated by dividing estimated overheads by a selected base such as direct labour hours or machine hours.

Sales revenue less variable costs; the amount each unit or product line contributes towards covering fixed costs and, once those are covered, towards generating profit.

The level of sales activity at which total revenue equals total cost, so the business makes neither profit nor loss; found by dividing fixed costs by contribution per unit.

A technique of setting predetermined costs for materials, labour and overheads and comparing them with actual costs to reveal variances that management investigates and corrects.

Information gathered by the auditor through inspection, observation, enquiry, confirmation and computation, supporting the conclusions on which the audit opinion rests; it must be sufficient and appropriate.

The size of an item or misstatement that could influence the economic decisions of users of financial statements, guiding the auditor on what to test and which errors to report.

The policies and procedures established by management to safeguard assets, ensure accurate and complete records, promote efficiency, and secure compliance with laws, regulations and management policies.

The position reported when financial statements are prepared under applicable standards and present the entity's financial position and results honestly, without material misstatement or misleading disclosure.

The document governing the relationship between a company and the outside world, stating its name, registered office, objects, limited liability and authorised share capital.

A written acknowledgement of a loan to a company, usually carrying a fixed rate of interest and repayable at a stated date, and often secured by a charge over the company's assets.

The principle that the owners of a company are answerable for its debts only up to the amount they agreed to contribute as share capital, so their private assets are protected.