ICAM Technician 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 at all times.

An entry on the left side of a ledger account. It increases assets and expenses, and reduces liabilities, equity, and income.

An entry on the right side of a ledger account. It increases liabilities, equity, and income, and reduces assets and expenses.

A record that collects all increases and decreases affecting one specific item, such as cash, rent, or a named customer, and shows its running balance.

The section of the ledger holding income and expense accounts, used to gather figures for the statement of profit or loss at period end.

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

A temporary account opened to hold the difference when a trial balance does not agree, later cleared once the underlying error is found and corrected.

A bookkeeping mistake where an entry is posted to the wrong class of account, for example treating a capital purchase as a repair expense; it does not disturb trial balance agreement.

An amount relating to the current period that has been incurred but not yet invoiced or paid, so it is added to expenses and shown as a liability.

An amount paid in the current period that relates to a future period, so it is removed from expenses and shown as a current asset.

The rule that income and the expenses incurred to earn it are recognised in the same accounting period, regardless of when cash moves.

The systematic allocation of the cost of a non-current asset, less any residual value, over the periods that benefit from its use.

A method charging an equal depreciation amount each year, calculated as cost less residual value divided by useful life.

A method applying a fixed percentage to the asset's falling carrying amount each year, giving higher charges early and lower charges later.

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

A reduction in the recoverable value of an asset below its carrying amount, written off to profit or loss when it occurs.

Spending on acquiring or improving a non-current asset whose benefit lasts beyond one period, recorded as an asset rather than an expense.

Spending on day-to-day running costs or on maintaining an asset in its existing condition, charged to profit or loss as incurred.

A comparison of the bank statement with the cash book, explaining differences such as unpresented cheques and uncredited deposits, to prove the corrected cash balance.

A cheque issued and recorded in the cash book but not yet cleared through the bank, so it appears as a deduction in a bank reconciliation.

A fixed regular payment instruction given by an account holder to their own bank, for example for rent or a loan instalment.

A payment arrangement where the recipient collects variable amounts from the payer's account after giving notice, commonly used for utility bills.

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

A receivable that is confirmed as uncollectable and is written off from the ledger, usually through an expense account.

The convention of exercising caution so that assets and income are not overstated and liabilities and expenses are not understated.

The assumption that an entity will continue operating for the foreseeable future, so assets are not valued at forced-sale amounts.

A report at a specific date listing assets, liabilities, and equity, showing that assets equal liabilities plus equity.

A report summarising income less expenses for a period to arrive at profit or loss, which is then added to equity.

Sales revenue less the cost of goods sold, measuring the margin earned before operating and other costs are deducted.

The cost of inventory actually sold in a period, calculated as opening inventory plus purchases less closing inventory.

Assigning a cost to unsold goods at period end; the lower of cost and net realisable value is normally required.

A cost-flow assumption where the earliest units purchased are treated as sold first, leaving recent costs in closing inventory.

A summary account in the general ledger whose balance should equal the total of the individual balances in its related subsidiary ledger, used to detect errors.

A system where a fixed float is given to a cashier, who is reimbursed periodically for vouchers spent so the float returns to its original level.

A transfer between two accounts of the same person or entity, for example offsetting a customer's credit balance against their debit balance.

The book of prime entry used to record transactions that do not belong in the sales, purchases, or cash books, such as corrections and asset purchases.

A detailed ledger holding the individual personal accounts behind a control account, such as the sales ledger of customer accounts.

The estimated selling price of inventory less the costs still needed to complete and sell it, used as a ceiling for inventory value.

Current assets less current liabilities, showing 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.