CPA Foundation Level
Financial Accounting glossary
Every term this guide defines, A to Z, each with the chapter that teaches it. Open it when a word in a question is unfamiliar, and test yourself on it in the last week: cover the definition and say it in one sentence.
16 terms from the free first chapter
A
- Assets
A present economic resource controlled by the entity as a result of past events, with the potential to produce economic benefits, for example the delivery van owned by a Nyeri-based agro-dealer.
Taught in Introduction to accounting
B
- Bookkeeping
The mechanical, day-to-day recording of transactions, the input side of accounting (see the next chapter).
Taught in Introduction to accounting
C
- Customers
Assess the entity's ability to continue supplying goods or services, particularly under long-term contracts.
Taught in Introduction to accounting
E
- Employees
Assess job security, pay prospects and the stability of their employer.
Taught in Introduction to accounting
- Equity
The residual interest in the assets of the entity after deducting all its liabilities, the owners' claim.
Taught in Introduction to accounting
- Expenses
Decreases in assets, or increases in liabilities, that result in decreases in equity, other than distributions to owners, for example rent paid.
Taught in Introduction to accounting
F
- Financial accounting
The branch of accounting concerned with preparing general-purpose financial statements for external users, this paper's focus.
Taught in Introduction to accounting
G
- Government and KRA
Uses financial information to assess tax liability (income tax, VAT) and to monitor compliance.
Taught in Introduction to accounting
I
- Income
Increases in assets, or decreases in liabilities, that result in increases in equity, other than contributions from owners, for example sales revenue.
Taught in Introduction to accounting
L
- Lenders
Banks and other lenders assess whether the entity can service and repay debt, the core question behind any credit appraisal.
Taught in Introduction to accounting
- Liabilities
A present obligation of the entity to transfer an economic resource as a result of past events, for example a trade payable owed to a supplier, or a bank loan from Equity Bank.
Taught in Introduction to accounting
M
- Management
Needs detailed, timely information to plan, control and make operating and strategic decisions.
Taught in Introduction to accounting
- Management accounting
The branch concerned with information for internal decision-making, not general-purpose and not this guide's focus (covered in CPA Management Accounting).
Taught in Introduction to accounting
O
- Owners/investors
Assess profitability and return on their capital, to decide whether to hold, add to, or exit their investment.
Taught in Introduction to accounting
T
- The public
Has an interest in an entity's employment, environmental and local economic impact.
Taught in Introduction to accounting
- Trade payables/suppliers
Assess whether to extend trade credit and on what terms.
Taught in Introduction to accounting
The full glossary adds every term from the other 13 chapters, A to Z, each with the chapter that teaches it.