KASNEB CS13 key terms

A system where every transaction is recorded in at least two accounts, with equal total debits and credits, so that the accounting equation stays balanced and errors are easier to detect.

Accounting that records income when earned and expenses when incurred, regardless of when cash moves, giving a truer picture of performance for a period.

A list of all ledger account balances at a date, split into debit and credit columns, used to check that total debits equal total credits before statements are prepared.

A temporary ledger account used to hold the difference when a trial balance does not balance, 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 market value changes.

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

A reduction in the recoverable amount of an asset below its carrying amount, requiring a write-down recognised as an expense in the period it is identified.

The assumption that an entity will continue operating for the foreseeable future without needing to liquidate or significantly curtail its activities.

The auditor's formal conclusion on whether financial statements present a true and fair view, which may be unmodified or modified depending on findings.

The policies, procedures and systems an entity uses to safeguard assets, ensure reliable records and promote compliance with laws and management direction.

Dividing tasks so that no single person controls all stages of a transaction, reducing the risk of error and fraud going undetected.

The excess of current assets over current liabilities, measuring the short-term funds available to run day-to-day operations.

Current assets divided by current liabilities, indicating an entity's ability to meet short-term obligations from assets expected to convert to cash within a year.

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

The principle that a sum received today is worth more than the same sum later, because money can earn a return over time.

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

The rate used to convert future cash flows into present value, typically reflecting the cost of capital and the riskiness of the cash flows.

The proportion of an entity's capital funded by debt rather than equity, indicating financial risk and sensitivity of returns to changes in interest rates.

The minimum return an entity must earn on its investments to satisfy providers of debt and equity, often expressed as a weighted average percentage.

A projection of expected cash receipts and payments over a future period, used to anticipate funding gaps or surpluses and plan borrowing.

The possibility that a borrower or counterparty fails to meet contractual payment obligations, causing the lender financial loss.

A statistical method that assigns a numerical rating to a borrower based on past behaviour and characteristics, used to predict likelihood of repayment.

An organisation that collects and maintains records of borrowers' credit histories and shares them with lenders to support lending decisions.

An asset pledged by a borrower to secure a loan, which the lender may seize and sell if the borrower defaults.

A promise by a third party to meet a borrower's obligation if the borrower fails, providing the lender with an additional source of repayment.

The amount of a loan expressed as a percentage of the value of the asset securing it, showing the lender's exposure relative to collateral value.

The systems, principles and processes by which an organisation is directed and controlled, balancing interests of shareholders, management and other stakeholders.

A conflict of interest arising where managers, acting as agents, pursue their own goals rather than the interests of the owners they represent.

The group elected or appointed to oversee an organisation's strategy and management, accountable to shareholders for its performance and compliance.

A subcommittee of the board, usually of independent non-executive members, that oversees financial reporting, internal controls and the external audit.

A structured, organisation-wide approach to identifying, assessing and responding to risks that could affect the achievement of objectives.

A set of interrelated components that collect, process, store and distribute data to support decision-making, coordination and control in an organisation.

An organised collection of structured data stored electronically so that it can be easily accessed, managed and updated by multiple users.

The accuracy, completeness and consistency of stored data over its lifecycle, protected by controls over entry, processing, storage and access.

The process of converting readable data into coded form so that only parties holding the correct key can decode and use it.

A fraudulent attempt, often by email or message, to trick people into revealing passwords or financial details by impersonating a trusted source.

The threshold at which an omission or misstatement could influence decisions of users of financial information, guiding what must be disclosed or corrected.

The principles of integrity, objectivity, confidentiality, competence and professional behaviour that guide conduct in accounting and related work.

The state of being free from relationships or interests that could compromise objectivity when forming a professional judgement or opinion.