Korea Computerized Tax Accounting Level 1 flashcards

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

Accounting Equation

Assets equal liabilities plus equity. Every journal entry keeps this equality because total debits must equal total credits, so the balance sheet always balances.

Accrual Basis

Revenue is recorded when the performance obligation is satisfied and expenses when incurred, regardless of cash timing. Korean GAAP applies this to all but the smallest entities.

Prepaid Expense Adjustment

At period end, the expired portion of a prepaid item is moved to expense by debiting expense and crediting the prepaid asset account, reducing the asset to its remaining benefit.

Straight-Line Depreciation

Annual depreciation equals cost minus residual value, divided by useful life. The same amount is recorded each period over the asset's estimated service life.

Closing Entries

Entries that transfer revenue and expense balances to income summary and then to retained earnings. Temporary accounts end at zero; permanent accounts carry forward.

Trial Balance Limitation

A trial balance proves only that debits equal credits. It cannot reveal omitted transactions, duplicate postings, or offsetting errors of equal amount.

Normal Account Balance

Assets and expenses carry debit balances; liabilities, equity, and revenue carry credit balances. A contrary balance usually indicates a posting or classification error.

Chart of Accounts Setup

The coded list of accounts that determines where each transaction posts and how it appears in statements. It must be finalized before transaction entry begins.

Opening Balance Entry

One-time entry of balance sheet account balances at system start. Total debits must equal total credits before the first period can be opened for posting.

Vendor Master Validation

The 10-digit business registration number must pass the check-digit rule. Invalid or duplicate numbers cause electronic tax invoice transmission to be rejected.

Period Lock

A system control that prevents posting to a closed accounting period. Reopening requires authorized reversal of the closing entry rather than direct editing.

Cost Center Field

A master data dimension attached to each voucher line for departmental or project reporting. It does not change the account code but drives internal management reports.

Role-Based Access

Users receive permissions by function: entry clerk, approver, closing manager, administrator. Separating entry from approval is the core control configured during system setup.

Voucher Numbering

System-generated unique identifiers per voucher type. Manual numbering creates duplicates and breaks the continuous audit trail required for tax and audit review.

Purchase Tax Invoice Entry

Debit expense or inventory for the supply value, debit input VAT receivable, and credit accounts payable for the gross amount including tax.

Sales Tax Invoice Entry

Debit accounts receivable for the gross amount, credit revenue for the supply value, and credit output VAT payable for the tax amount shown on the invoice.

Voucher Approval Status

Draft vouchers do not affect ledgers. Only approved vouchers post to the general ledger, so unapproved items are excluded from trial balances and reports.

Reversing Voucher

A new entry that exactly offsets a posted voucher, referencing the original. Direct deletion is prohibited because it destroys the audit trail.

Bank Reconciliation

Matching book cash balances to bank statements line by line, identifying deposits in transit, outstanding checks, and bank errors before period close.

Evidence Management

Linking each voucher to its source document such as a tax invoice, receipt, or contract. Missing evidence is flagged and blocks period closing.

VAT Standard Rate

Ten percent applies to taxable supplies of goods and services. Output VAT is collected on sales; input VAT on purchases is deductible when supported by valid tax invoices.

Zero-Rate Supply

A supply taxed at zero percent, mainly exports and foreign-currency services. Input VAT is refundable, but supporting export documents are required to keep the rate.

VAT Period Structure

First period runs January to June, second period July to December. Returns are due within 25 days of period end, with quarterly prepayment filings for corporations.

Non-Deductible Input VAT

Input VAT on non-business use, general passenger cars, and entertainment expenses cannot be deducted. It is expensed or capitalized with the related purchase.

Electronic Tax Invoice

A tax invoice issued and transmitted electronically through the national tax system or an authorized provider. It must be sent within the legal deadline to avoid penalties.

Late Issuance Penalty

Issuing a tax invoice after the deadline adds a penalty based on the supply value, generally one percent, or two percent when issued after the supply.

Withholding Tax Timing

Tax withheld on payments to individuals or foreign entities is recorded as a liability when payment occurs and remitted by the tenth of the following month.

Closing Sequence

Post adjusting entries, run the adjusted trial balance, produce statements, close temporary accounts to retained earnings, then lock the period.

Cut-Off Adjustment

Goods delivered but not invoiced, or invoices issued before delivery, are adjusted so revenue and cost fall in the period the obligation was satisfied.

Severance Provision

An accrued liability for employee retirement benefits estimated at closing. The entry debits retirement benefit expense and credits the severance provision liability.

Subsidiary Ledger Reconciliation

Receivable, payable, and inventory subledger totals must equal their general ledger control accounts before statements are issued; differences indicate unposted or misposted vouchers.

Segregation of Duties

The person entering a voucher cannot approve it, and the person approving payment cannot reconcile the bank account. This prevents concealment of errors and fraud.

Audit Trail Log

A system record of user identity, timestamp, and before-and-after values for every voucher creation, change, and approval. It supports audits and tax investigations.