ICAN CA Foundation flashcards

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

Accounting Equation

Assets = Liabilities + Capital. It underlies the double-entry system because each transaction changes at least two elements while keeping the equation balanced.

Dual Aspect Concept

Every transaction has two effects: a debit and an equal credit. This is why total debits must equal total credits in a trial balance.

Going Concern Assumption

Financial statements assume the entity will continue operating in the foreseeable future, so assets are not valued at forced-sale liquidation prices.

Accrual Concept

Revenue and expenses are recognised when earned or incurred, not when cash is received or paid, so profit reflects the period's activity.

Suspense Account

A temporary account opened to hold the difference in a trial balance caused by one-sided errors, closed once all errors are located and corrected.

Error of Principle

A transaction recorded in the wrong class of account, such as capital expenditure treated as revenue. It does not disturb the trial balance but misstates profit.

Bank Reconciliation Statement

A statement reconciling the cash book bank balance with the pass book balance, explaining cheques in transit, unpresented cheques, bank charges, and errors.

Straight Line Depreciation

An equal depreciation charge each year, computed as (cost minus residual value) divided by useful life. Also called the fixed instalment method.

Simple Interest Formula

Interest = Principal × Rate × Time, where rate is a decimal per period and time is in the same period unit as the rate.

Compound Interest Formula

Amount = P(1 + i)^n, so compound interest equals that amount minus P. Interest earns interest in each subsequent period.

Coefficient of Variation

Standard deviation divided by mean, expressed as a percentage. It compares variability of series measured in different units or with different means.

Median of Grouped Data

The value in the median class found by L + [(N/2 − cf) ÷ f] × h, where cf is cumulative frequency before that class.

Mode of Grouped Data

L + [(f1 − f0) ÷ (2f1 − f0 − f2)] × h, using the modal class frequency and the frequencies of the classes before and after it.

Correlation Coefficient

A measure between −1 and +1 of the strength and direction of linear association between two variables; zero indicates no linear relationship.

Regression Coefficients

bxy = r(σx/σy) and byx = r(σy/σx). Their product equals r squared, and both regression lines pass through the mean point.

Combination Formula

nCr = n! ÷ [r!(n − r)!], giving the number of ways to select r items from n when order does not matter.

Permutation Formula

nPr = n! ÷ (n − r)!, giving the number of ordered arrangements of r items chosen from n distinct items.

Addition Rule of Probability

P(A or B) = P(A) + P(B) − P(A and B). For mutually exclusive events the intersection term is zero.

Law of Demand

Other things equal, quantity demanded falls as price rises and rises as price falls, producing a downward-sloping demand curve.

Price Elasticity of Demand

Percentage change in quantity demanded divided by percentage change in price. Demand is elastic above 1 and inelastic below 1 in absolute value.

Law of Variable Proportions

In the short run, adding more units of a variable input to fixed inputs first raises marginal product, then lowers it, and eventually makes it negative.

Break-Even Point

The output at which total revenue equals total cost, computed as fixed cost divided by contribution per unit (price minus variable cost).

Perfect Competition Equilibrium

A price-taking firm maximises profit where marginal cost equals marginal revenue (equal to price), with marginal cost rising through that point.

Span of Control

The number of subordinates directly reporting to one manager. A wide span produces a flat organisation; a narrow span produces a tall one.

Fayol's Management Functions

Planning, organising, commanding, coordinating, and controlling: the five activities Fayol identified as constituting the manager's work.

Valid Contract Essentials

Offer and acceptance, lawful consideration, capacity, free consent, lawful object, and intention to create legal relations, as required by the Indian Contract Act, 1872.

Minor's Agreement

Void ab initio under Indian law because a minor lacks capacity to contract; the minor cannot be held liable, though necessaries supplied may be recovered from the estate.

Voidable Contract

A contract whose consent was obtained by coercion, undue influence, fraud, misrepresentation, or mistake, and which the aggrieved party may rescind.

Condition versus Warranty

A condition is essential to the contract's main purpose and its breach allows repudiation; a warranty is collateral and its breach gives damages only.

Crossed Cheque

A cheque with two parallel lines across its face, directing the banker to pay only through a bank account and not across the counter.

Conflict of Interest

A situation where a personal or financial interest could improperly influence professional judgement; the standard response is disclosure and withdrawal from the decision.