KASNEB CS25 key terms

A system that records every transaction in at least two accounts, one debit and one credit, so that total debits always equal total credits and the accounting equation stays balanced.

Accounting that records income when earned and expenses when incurred, regardless of when cash changes hands, giving a more faithful picture of performance than cash timing alone.

The rule that expenses are recognised in the same period as the revenues they helped generate, so profit for a period reflects the costs of earning that period's income.

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

A temporary ledger account holding the difference when a trial balance does not agree, pending investigation and correction of the underlying error.

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

The value at which an asset or liability appears in the statement of financial position, being cost less accumulated depreciation or impairment.

A reduction in the recoverable amount of an asset below its carrying amount, requiring the book value to be written down and a loss recognised.

An amount paid in advance for goods or services not yet received, treated as an asset until the benefit is consumed in a later period.

A cost incurred in a period but not yet invoiced or paid, recorded as a liability so that expenses and payables are not understated.

Current assets minus current liabilities, measuring the short-term funds available to run day-to-day operations.

Current assets divided by current liabilities, indicating whether short-term obligations can be met from short-term resources.

Current assets excluding inventory, divided by current liabilities, a stricter liquidity test because inventory may be slow to convert to cash.

The principle that a sum of money available today is worth more than the same sum later, because it can be invested to earn a return.

The sum of a project's expected cash flows discounted to today at a required rate, less the initial outlay; a positive result suggests value creation.

The discount rate at which a project's net present value equals zero, often compared with a hurdle rate to decide whether to invest.

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

The blended return a firm must earn on its investments to satisfy lenders and shareholders, often computed as a weighted average.

The proportion of a firm's capital funded by debt rather than equity, indicating financial risk because interest and repayments are fixed obligations.

The number of days between paying for inventory and collecting cash from customers, combining inventory days, receivable days and payable days.

The conditions under which a supplier sells on account, including the payment period, any early-settlement discount and late-payment penalties.

A report that groups receivables by how long they have been outstanding, helping to identify slow payers and estimate doubtful debts.

An estimate of receivables unlikely to be collected, charged as an expense and deducted from receivables in the statement of financial position.

A statistical method that rates an applicant's likelihood of repayment using factors such as payment history, income and existing obligations.

An asset pledged by a borrower that a lender may seize and sell if the loan is not repaid, reducing the lender's loss.

A condition written into a loan agreement that the borrower must meet, such as maintaining a minimum interest cover or limiting further borrowing.

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

The conflict that arises when managers, acting for owners, pursue their own interests rather than maximising shareholder value, creating a need for monitoring.

The body elected by shareholders to oversee strategy and hold management to account, ideally including independent members free of management ties.

A subcommittee of the board, usually of independent directors, that oversees financial reporting, internal controls and the relationship with external auditors.

The policies and procedures designed to safeguard assets, ensure reliable records and prevent fraud or error, including segregation of duties and authorisation limits.

Splitting tasks so that no single person authorises, records and handles the same transaction, reducing the risk that errors or fraud go undetected.

The accuracy, completeness and consistency of stored data over its life, protected through validation rules, access controls and backup procedures.

Converting data into a coded form that only authorised parties can read using a key, protecting confidentiality during storage or transmission.

Rules that decide who may view or change a system and what they may do, typically using user accounts, passwords and role-based permissions.

Using remote servers over the internet for storage and processing, offering flexibility and lower upfront cost but raising concerns over data location and dependence on a provider.

A chronological record of system activity and transactions that allows events to be traced, supporting investigation, reconciliation and accountability.

The principles of integrity, objectivity, confidentiality and competence that guide a professional's conduct and decisions when serving clients or employers.

A situation where a person's private interest could improperly influence professional judgement, requiring disclosure or withdrawal from the matter.

The state of being free from relationships or pressures that could compromise objectivity, especially important for auditors expressing an opinion on financial statements.