Glossary

Accrual basis. Recording income and expenses when they are earned or incurred, not when the money moves. A business using the accrual basis can be profitable and short of cash at the same time.

Adjusting event. Something that happens after balance date that provides evidence of a condition existing at balance date. The amounts in the accounts are adjusted for it.

Aged debtors. Money owed by customers, grouped by how long it has been owed.

Assurance. The work an auditor or reviewer does to reach a conclusion about information somebody else prepared.

Audit trail. The record of what was entered, when, by whom, and what was done about it. In ByteBook it is a chain of fingerprints.

Balance sheet. A statement of what a business owns and owes at a date. Also called the statement of financial position.

Bill. A supplier's invoice that you will pay later. Until it is paid it sits in creditors.

Chain (the). ByteBook's page showing every entry as a block and every fingerprint as a link between two blocks.

Closing balance. The balance on a bank statement at its date.

Creditors. People and businesses the business owes money to.

Cut-off. The question of whether a transaction has been recorded in the right period. One of the fourteen procedures.

Debtors. People and businesses that owe the business money.

Depreciation. Spreading the cost of an asset over the periods it is used in.

Drawings. Money or goods an owner takes out of a business for personal use.

Effective date. The date from which a standard applies, usually expressed as periods beginning on or after a particular day.

Exempt supply. A supply that carries no GST and for which the business cannot claim GST on related costs. Rent on a residential dwelling is the common example.

Expected credit loss. The amount a business expects not to collect from money it is owed.

Fingerprint (SHA-256). A short string computed from the contents of an entry. Change the contents and the fingerprint changes.

General ledger. Every entry that touched an account, in order.

GST return. The statement of GST collected and GST credits claimed for a period, filed with Inland Revenue.

IASB. The International Accounting Standards Board, which issues IFRS accounting standards.

IAASB. The International Auditing and Assurance Standards Board, part of IFAC, which issues the international auditing standards.

IFAC. The International Federation of Accountants, which publishes the IAASB Handbook.

ISA (NZ). An international standard on auditing with New Zealand additions, issued by the XRB.

ISQM 1. The international standard on quality management for firms. In New Zealand its requirements appear in PES 3.

Ledger. The accounting record of a business's transactions. In ByteBook the general ledger is the detail and the trial balance is the summary.

Material. Large enough to matter to the person reading the financial statements. There is no fixed number; the standard defines it by whether omitting or misstating an item could influence decisions.

Merkle root. A single fingerprint computed from all the fingerprints in a record, so the whole record can be checked with one value.

NZ IFRS. New Zealand equivalents to international financial reporting standards: the IASB's text with New Zealand additions.

PES. Professional and ethical standards issued by the XRB, including the code of ethics (PES 1), quality management for firms (PES 3) and engagement quality reviews (PES 4).

Performance materiality. A lower figure than materiality, used in planning so that the chance of undetected misstatements exceeding materiality is kept low.

Performance obligation. A promise in a contract with a customer to transfer a good or service. Revenue is recognised when it is satisfied.

Posting. Recording an entry in the ledger. Until an invoice is posted it is only a document.

Provision. A liability of uncertain timing or amount, recognised where there is a present obligation from a past event, a probable outflow, and a reliable estimate.

Reconciliation. Comparing two records that should agree — the ledger and the bank — and explaining the difference.

Sealed pack. A period's entries, figures and fingerprints hashed together into a single value, so it can be verified later.

Trial balance. Every account with its balance, used to check that total debits equal total credits.

Turnover. Total sales, usually excluding GST.

Unmodified opinion. An auditor's conclusion that the financial statements are prepared, in all material respects, in accordance with the applicable framework. The everyday term is a clean opinion.

Void. To cancel an entry by posting its mirror image, leaving both in the record.

XRB. The External Reporting Board, which issues New Zealand's accounting and auditing standards.

Zero-rated supply. A supply taxed at 0%: it carries no GST but is not exempt, so GST on related costs can usually still be claimed.