KASNEB DCM key terms

The possibility that a borrower or customer fails to repay money owed, or pays later than agreed, causing a financial loss to the lender or supplier.

An assessment of how likely a customer or borrower is to repay credit on the agreed terms, judged from income, past repayment record, assets and existing debts.

A statistical method that turns applicant information such as income, existing debts and repayment history into a numerical score used to decide whether credit should be granted.

A checklist used to judge a credit applicant: character (willingness to pay), capacity (ability to pay), capital (own stake), collateral (security offered) and conditions (the economic environment).

An asset or right pledged by a borrower which the lender may sell or take over if the loan is not repaid, reducing the lender's possible loss.

The maximum amount of credit a supplier or lender allows a named customer to owe at any one time, set after assessing the customer's ability to pay.

The written rules a business follows in deciding who receives credit, on what terms, how much, and what action is taken when payment is late.

A table that groups unpaid customer invoices by how long they have been outstanding, for example 0 to 30 days, 31 to 60 days and over 90 days.

The average number of days a business takes to collect payment from credit customers, calculated by dividing receivables by credit sales and multiplying by 365.

An amount owed by a customer that is judged to be unrecoverable, so it is removed from receivables and charged as an expense in the accounts.

An organisation that collects and supplies information about borrowers' repayment histories, helping lenders check an applicant's record before granting credit.

A system in which every transaction is recorded in at least two accounts, as a debit and an equal credit, so the accounting equation stays in balance.

A list of all ledger account balances at a chosen date, set out in debit and credit columns, used to test whether total debits equal total credits.

The book of first entry in which transactions are recorded in date order with the accounts to be debited and credited and a short explanation.

The rule that income and expenses are recognised in the period in which they are earned or incurred, whether or not cash has moved.

The rule that costs incurred in earning revenue are reported in the same accounting period as the revenue they helped to produce.

The systematic spreading of the cost of a non-current asset over its useful life, reflecting the benefit consumed in each accounting period.

The assumption that a business will continue trading for the foreseeable future, so its assets are valued on a normal operating basis rather than at break-up prices.

A statement explaining the difference between the cash book balance and the bank statement balance at a date, listing items such as unpresented cheques and bank charges.

An estimate charged against profit for receivables that may not be collected, so that debtors are shown in the accounts at a prudent amount.

A legally enforceable agreement between two or more parties that creates rights and duties, normally requiring offer, acceptance, consideration and an intention to be legally bound.

The two steps by which agreement is reached: one party puts forward definite terms and the other agrees to them without conditions or changes.

Something of value, such as money, goods or a promise, that each party gives in exchange for what the other party provides under a contract.

A relationship in which one person, the agent, is authorised to act for another, the principal, and can create legal relations between the principal and third parties.

A document such as a cheque, bill of exchange or promissory note that promises payment of money and can be transferred by delivery or endorsement.

The right of a person who holds another's goods to keep possession of them until a debt connected with those goods has been paid.

A credit sale in which the buyer takes the goods and pays by instalments, while ownership passes only when the final instalment is settled.

The value of the next best alternative given up when a choice is made, representing the real cost of using resources in one way rather than another.

The quantity of a good or service that buyers are willing and able to purchase at each possible price during a given period.

A measure of how strongly the quantity demanded responds to a change in price, calculated as the percentage change in quantity divided by the percentage change in price.

A sustained rise in the general level of prices, which reduces the purchasing power of money and lowers the real value of fixed repayments received by lenders.

A written document setting out a venture's product, market, operations, management and financial forecasts, used to guide the owner and persuade lenders or investors.

The level of sales at which total revenue equals total cost, so the business makes neither a profit nor a loss.

The ethical duty to keep information obtained through work private and not disclose it to unauthorised people, except where the law or the client permits.

Being straightforward and honest in all professional and business relationships, avoiding misleading statements and refusing to be linked to false information.

The duty to keep professional judgement free from bias, conflict of interest and the undue influence of others when making decisions.

A situation in which a person's personal, financial or other interest could improperly influence the professional decisions or duties they are expected to carry out.

A fraud in which criminals send messages that look genuine to trick people into revealing passwords, card numbers or other confidential details.

A login method that requires two different proofs of identity, such as a password plus a one-time code sent to a phone, making unauthorised access harder.

Rules governing how personal information may be collected, stored, used and shared, giving individuals rights over data that concerns them.