KASNEB CICT flashcards

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

Accounting Equation

Assets equal capital plus liabilities. Every transaction affects at least two items and keeps the equation in balance, forming the basis of the double-entry system.

Accruals Concept

Income and expenses are recognised in the period they are earned or incurred, regardless of when cash is received or paid, giving a truer view of performance.

Trial Balance Limitation

A trial balance proves debits equal credits but cannot detect errors of principle, omission, original entry, compensating errors or complete reversal of entries.

Straight-Line Depreciation

Annual charge equals cost minus residual value, divided by useful life. The same amount is expensed each year, suiting assets whose benefit is spread evenly.

Bank Reconciliation Purpose

Explains the difference between the bank statement balance and the cash book by adjusting for unpresented cheques, uncredited lodgements, bank charges and dishonoured cheques.

Net Present Value

The sum of discounted future cash flows minus the initial investment. A positive NPV means the project earns more than the cost of capital.

Internal Rate of Return

The discount rate at which a project's NPV equals zero. Accept the project when IRR exceeds the required rate of return; it may mislead with non-conventional cash flows.

Weighted Average Cost of Capital

The blended required return on a firm's debt and equity, weighted by market values. Debt is adjusted for tax because interest is tax-deductible.

CAPM Formula

Required return equals risk-free rate plus beta multiplied by the market risk premium. Beta measures systematic risk, which diversification cannot remove.

Payback Period

The time taken for cumulative cash inflows to equal the initial outlay. It is simple and favours liquidity but ignores cash flows after payback and time value.

Quick Ratio

Current assets excluding inventory and prepayments, divided by current liabilities. It tests short-term liquidity without relying on selling stock.

Separation of Duties

Authorising, recording, custody and reconciliation of a transaction are assigned to different people so no individual can conceal errors or fraud alone.

Audit Committee Role

A board committee of independent non-executive directors that oversees financial reporting, internal controls and the relationship with external and internal auditors.

Agency Problem

Conflict where directors pursue their own interests rather than shareholders'. Mitigated by independent directors, share-based pay, audit and transparent disclosure.

Span of Control

The number of subordinates directly reporting to one manager. A wide span flattens the structure and reduces management layers but increases supervisory load.

Matrix Structure

Combines functional and project or divisional reporting so staff have two bosses. It improves resource sharing but creates conflicting priorities and dual authority.

OSI Reference Model

Seven layers from physical transmission to application: Physical, Data Link, Network, Transport, Session, Presentation and Application. Each layer serves the one above.

Incremental Backup

Copies only data changed since the most recent backup of any type. It is fast but restoration requires the last full backup plus every incremental since.

Primary Key

A field or combination of fields that uniquely identifies each record in a table. It cannot be null and enforces entity integrity.

Third Normal Form

A table in second normal form with no transitive dependencies, meaning non-key attributes depend only on the primary key and not on other non-key attributes.

Phishing

Deceptive emails or messages impersonating a trusted party to trick users into revealing credentials or clicking malicious links. Defence includes user training and filtering.

Cloud Service Models

IaaS provides virtual infrastructure, PaaS provides a development platform, SaaS provides ready applications. Customer management responsibility decreases from IaaS to SaaS.

Recovery Time Objective

The maximum acceptable time to restore a system after disruption. It drives the choice between hot, warm and cold recovery sites.

Firewall Function

Filters incoming and outgoing network traffic against defined rules, blocking unauthorised access while permitting approved services between networks.

Contribution per Unit

Selling price minus variable cost per unit. It contributes towards fixed costs and profit; break-even units equal fixed costs divided by contribution per unit.

Overhead Absorption Rate

Budgeted production overheads divided by budgeted activity level. It apportions indirect costs to products; over- or under-absorption arises when actuals differ.

Material Usage Variance

Standard quantity for actual output minus actual quantity used, multiplied by standard price. It measures efficiency in using materials.

Relevant Cost

A future incremental cash flow that differs between alternatives. Sunk costs, committed costs and non-cash items are excluded from decisions.

Interest Cover

Operating profit divided by interest payable. A low ratio signals that profits barely cover interest, raising lender risk and financial distress.

Dividend Yield

Dividend per share divided by market price per share, expressed as a percentage. It shows the cash return from holding a share.

Purchasing Power Parity

Exchange rates adjust so identical goods cost the same across countries, implying the currency with higher inflation depreciates against the other.

Profitability Index

Present value of cash inflows divided by initial investment. Under capital rationing, rank divisible projects by this index to maximise value from limited funds.

Herzberg Two-Factor Theory

Hygiene factors such as pay and conditions prevent dissatisfaction; motivators such as achievement and recognition create satisfaction and drive performance.

Adverse Variance

A variance that reduces profit compared with budget, such as costs above plan or revenue below plan. Favourable variances increase profit.

Delegation Principle

A manager may delegate authority to a subordinate but remains accountable for the outcome. Authority delegated must match the responsibility given.

Comply or Explain

A governance approach where companies either follow a code's provisions or disclose and justify non-compliance, allowing flexibility over strict rules.