Principles of Accounting glossary

Transactions are recorded when they occur, not necessarily when cash is received or paid.

Taught in Introduction to accounting

Resources controlled by the entity as a result of past events, from which future economic benefits are expected to flow to the entity.

Taught in Introduction to accounting

The business is accounted for as separate and distinct from its owner(s), even where they are legally the same person (a sole trader, CCP Credit Management, under types of borrower).

Taught in Introduction to accounting

Information can be compared with other periods and other entities.

Taught in Introduction to accounting

The same accounting methods are applied period to period, so results are genuinely comparable.

Taught in Introduction to accounting

Need assurance of the business's ongoing ability to supply goods or services, particularly where they depend on it long-term.

Taught in Introduction to accounting

Every transaction has two effects on the accounting equation, the foundation of double entry book-keeping (both covered in the next chapter).

Taught in Introduction to accounting

Need information on the business's stability and profitability, bearing on job security and pay.

Taught in Introduction to accounting

The residual interest in the entity's assets after deducting all its liabilities, the owners' stake.

Taught in Introduction to accounting

Decreases in economic benefits during the period, in the form of outflows or depletions of assets or increases of liabilities, that decrease equity.

Taught in Introduction to accounting

Information is complete, neutral and free from error, genuinely depicting what it purports to represent.

Taught in Introduction to accounting

Financial statements are prepared on the assumption the business will continue operating for the foreseeable future, not that it is about to be liquidated.

Taught in Introduction to accounting

Need financial information to assess tax liability and monitor compliance with regulation.

Taught in Introduction to accounting

Assets are generally recorded at their original cost, not a fluctuating current market value.

Taught in Introduction to accounting

Sets standards for the professional education and development of accountants globally.

Taught in Introduction to accounting

The independent body that develops and issues IFRS and IAS.

Taught in Introduction to accounting

The predecessor standards to IFRS; many remain in force today (still numbered IAS) alongside the newer IFRS-numbered standards, both issued under the same IASB framework.

Taught in Introduction to accounting

Kenya's professional accountancy body, which also advises kasneb on examination standards (the background to CCP Credit Management).

Taught in Introduction to accounting

The current set of accounting standards issued by the IASB, governing how transactions and events are recognised, measured and disclosed in financial statements of for-profit entities.

Taught in Introduction to accounting

Increases in economic benefits during the period, in the form of inflows or enhancements of assets or decreases of liabilities, that increase equity.

Taught in Introduction to accounting

The equivalent standards for public sector entities, covered further in the chapter on public sector accounting.

Taught in Introduction to accounting

Develops IPSAS, the public sector accounting standards covered in the closing chapter.

Taught in Introduction to accounting

Need to assess whether the business can meet its obligations, the core question behind the credit analysis this whole CCP qualification builds toward.

Taught in Introduction to accounting

Present obligations of the entity arising from past events, settlement of which is expected to result in an outflow of resources.

Taught in Introduction to accounting

Needs detailed, timely information to plan, control operations, and make day-to-day and strategic decisions.

Taught in Introduction to accounting

Expenses are recognised in the same period as the income they helped generate.

Taught in Introduction to accounting

Only information significant enough to influence a user's decision needs to be separately disclosed.

Taught in Introduction to accounting

Only transactions and events that can be expressed in monetary terms are recorded.

Taught in Introduction to accounting

Need to know profitability and the return on their investment, to decide whether to hold, buy more, or sell.

Taught in Introduction to accounting

Caution is exercised so that assets and income are not overstated, and liabilities and expenses are not understated.

Taught in Introduction to accounting

Standards exist so that financial statements prepared by different entities are comparable, consistent and reliable, letting the users above trust and compare the numbers rather than each entity choosing its own rules.

Taught in Introduction to accounting

Information is capable of making a difference to the decisions users make.

Taught in Introduction to accounting

Need to know whether the business is a good credit risk before extending trade credit (CCP Credit Management, in the chapter on trade credit).

Taught in Introduction to accounting

May be affected by a business's activities, employment, environment, local economic impact, and so has an interest in its financial position.

Taught in Introduction to accounting

Information is available to decision-makers in time to influence their decisions.

Taught in Introduction to accounting

Information is presented clearly enough for users with a reasonable knowledge of business to comprehend it.

Taught in Introduction to accounting

Different knowledgeable, independent observers could reach consensus that the information faithfully represents what it claims.

Taught in Introduction to accounting