PIPFA Foundation key terms

An accounting method where every transaction is recorded in at least two accounts, with total debits always equalling total credits, keeping the accounting equation balanced after each entry.

The first record of a transaction, showing date, accounts debited and credited, amounts, and a short narration, later posted to the ledger accounts.

The process of transferring amounts from journal entries into the relevant individual accounts in the general or subsidiary ledger so balances can be calculated.

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

Recording income when it is earned and expenses when they are incurred, regardless of when cash actually moves, so reported profit reflects the period's activity.

An amount paid in advance for goods or services not yet consumed, carried as an asset until the benefit is used, then charged to expense.

An expense already incurred but not yet invoiced or paid at the reporting date, such as unpaid wages or utilities, recognised as a liability and an expense.

The systematic allocation of a tangible fixed asset's depreciable cost over its useful life, reflecting consumption of economic benefit rather than market value change.

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

A reduction in an asset's recoverable amount below its carrying amount, requiring a write-down and recognition of an impairment loss in the period identified.

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

A bookkeeping mistake where a transaction is recorded in the wrong class of account, such as capital expenditure charged to repairs, which a trial balance will not reveal.

A comparison of the cash book balance with the bank statement at a date, explaining differences such as unpresented cheques and uncredited deposits to arrive at an agreed figure.

A book of prime entry combining the cash account and bank account, recording receipts and payments and providing the figure later reconciled to the bank statement.

A cheque issued and recorded in the cash book but not yet presented to and cleared by the bank, causing the bank statement balance to differ from the cash book.

The excess of current assets over current liabilities, measuring the short-term funds available to run day-to-day operations and meet obligations as they fall due.

Current assets divided by current liabilities, indicating whether short-term resources cover short-term obligations; a result below one signals potential liquidity strain.

The ability of an entity to convert assets into cash, or otherwise raise cash, quickly enough to settle liabilities when they become due without significant loss.

The threshold above which omissions or misstatements could influence decisions of users of financial statements, guiding what must be disclosed or corrected.

The assumption that an entity will continue operating for the foreseeable future, without intention or necessity to liquidate or curtail operations significantly.

The auditor's formal conclusion on whether financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.

The policies, procedures and organisational structures designed to safeguard assets, ensure reliable records and promote compliance with laws and management directives.

An internal control principle separating authorisation, custody of assets and record-keeping among different people so no single person controls a transaction end to end.

An independent appraisal function within an organisation that evaluates risk management, control and governance processes and reports findings to those charged with governance.

The part of an economy owned or controlled by government, including ministries, departments, agencies and local authorities, funded mainly through taxation and grants.

The legislative authorisation granting a government entity the right to spend public funds up to a stated limit for specified purposes within a financial year.

The authorised transfer of funds from one budget line or head to another within an approved appropriation, usually subject to defined limits and approval levels.

Recording obligations such as purchase orders or contracts at the point they are entered into, so budget control reflects funds already earmarked but not yet spent.

A system where resources are classified into separate self-balancing funds, each with its own purpose and restrictions, common in government and non-profit entities.

A reporting basis used in some public sector frameworks where revenues are recognised when measurable and available, and expenditures when the related liability is incurred.

The assessment of public spending against economy, efficiency and effectiveness, asking whether the same outputs could be achieved at lower cost with intended outcomes.

An examination of whether a public programme or entity operates economically, efficiently and effectively, reporting conclusions and recommendations rather than a financial statement opinion.

The obligation of public officials to account for the use of resources entrusted to them and to answer to legislature, auditors and citizens for results achieved.

A short opening section of a report or presentation that states purpose, key findings and recommendations so busy readers can grasp the message without reading everything.

Studying who will receive a message, what they already know and what they need, so content, tone, level of detail and format are chosen to fit them.

Spoken or written cues that tell an audience where an argument is going, such as stating the agenda, numbering points and summarising before moving on.

A chart, slide, table or diagram used alongside speech to make data or relationships easier to grasp, ideally simple, labelled and supporting rather than duplicating the narration.

Applying procedures to fewer than all items in a population so that each sampling unit has a chance of selection, allowing conclusions about the whole population.

The recorded path of a transaction from source document through processing to financial statements, enabling an auditor to trace, verify and reconstruct activity.

An output listing only items that breach a defined rule or threshold, such as payments above a limit, used to focus audit testing on unusual activity.