1 Flashcards
What is the PII Minimum Cover?
It’s based on a company’s turnover. Turnover £100k or less then PII = £250k. Turnover £100,001 to £200,000 then PII = £500,000. Turnover £200,001 and above then PII = £1m
What is Run off minimum cover?
£1,000,000 for a period of 6 years from the expiry date of the policy in force at time of cessation
What are management accounts?
Accounts used internally for board use. Can be run monthly, quarterly, or yearly
How often are profit and loss accounts run?
Yearly is the norm
What’s the different between and profit and loss statement and a balance sheet?
Profit and loss is a statement of income and expenses over a period of time whereas a balance sheet is a statement of assets and liabilities
What’s the purpose of a cash flow statement?
To provide information about cash receipts and cash payments over a period of time
How long do companies need to keep records of their accounts for?
Private company’s - 3 years
Public company’s - 6 years
What is IFRS?
International financial reporting standards
They set rules so that financial statements can be consistent, transparent, and comparable around the world
What’s gross profit?
Profit a company makes after deducting the costs associated with making and selling its goods or services
What is financial auditing?
Where an auditor comes in behind an accountant and verifies their work
What businesses are exempt from accounting auditing?
In the UK, small and micro business are except from auditing. To qualify they must meet any of the following two:
1) annual turnover less than £10.2m
2) balance sheet must not be more than £5.1m
3) average number of employees not more than 50
What are the key financial statement that companies provide?
Profit and loss accounts
Balance sheets
Cash flow statements
What’s the difference between management accounts and financial accounts?
Management accounts are for the internal use of the management team
Financial accounts are the company accounts that are required by UK law
Explain your understanding of the following terminology-
1) capital allowances
2) sinking fund
3) insolvency
4) companies house
5) HMRC
Capital allowances - tax relief on certain items purchased for a business for examples tools and equipment
Sinking funds - funds that are set aside first further expense or long term dept
Insolvency- an inability to pay debts where liabilities exceed assets
Companies House - an agency that incorporates and dissolves limited companies within the UK
HMRC - her majesties revenue and customs
What are liquidity ratios?
Measure the ability of a company to pay off its current liabilities by converting its current assets into cash
Calculation= current assets / current liabilities
Usually around 1.5
