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3 - MI - Study Cards > 1 - Accounting Principles > Flashcards

1 - Accounting Principles Flashcards

1
Q

What is a statement of profit or loss?

A

Financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time, usually yearly.

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2
Q

What is a cashflow statement?

A

A Cash Flow Statement shows how much cash is generated from a company’s core products or services. A strong, positive cash flow from operations (especially over time) is a good sign of a healthy company.

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3
Q

What is a balance sheet?

A

A balance sheet shows the value of a business on a particular date. A balance sheet shows what the business owns and owes (its assets and its liabilities).

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4
Q

What is the difference between a profit and loss statement and a balance sheet?

A

A balance sheet provides both investors and creditors with a snapshot as to how effectively a company’s management uses its resources. A profit and loss (P&L) statement summarizes the revenues, costs and expenses incurred during a specific period of time

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5
Q

Give me some examples of how you forecast your individual fee income

A

I keep a weekly and monthly log of ongoing project, billing dates and amounts to I have visibility and clarity of I am going to hit my targets.

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6
Q

Give me some examples of the subject areas of the RICS guidance on Conflicts of Interest.

A

Record Keeping, Informed Consent, Information Barriers

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7
Q

What do companies need to provide every year to comply with the Companies Act 2006?

A

An annual summary of a company’s capital and shares by means of a statement of capital, together with an up-to-date list of directors with their names, service address and business occupation

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8
Q

Give me some examples of the subject matter of the RICS Guidance Note on Practice Management (Management of Surveying Businesses - you have not mentioned this document, but I suggest you familiarise yourself with it).

A

This document is archived

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9
Q

What current challenges is Covid and/or Brexit bringing to Accounting Principles?

A

The initial lack of face to face interaction make general business and day to day ongoing challenging. As demenadn ahs increased for labour, constrctor and materials this is having an impact on the suitability of works across the sector.

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10
Q

What is GAAP ?

A

Generally Accepted Accounting Practice in the UK (UK GAAP) is the body of accounting standards published by the UK’s Financial Reporting Council (FRC). In this section you can find summaries of the standards and practical resources such as factsheets, FAQs, model accounts, and eBooks.

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11
Q

What is a cash flow statement?

A

• A Cash Flow Statement shows how much cash is generated from a company’s core products or services. A strong, positive cash flow from operations (especially over time) is a good sign of a healthy company.

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12
Q

What is a balance sheet ?

A

• A balance sheet shows the value of a business on a particular date. A balance sheet shows what the business owns and owes (its assets and its liabilities).

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13
Q

What is a Cash flow statement?

A

• A Cash Flow Statement shows how much cash is generated from a company’s core products or services. A strong, positive cash flow from operations (especially over time) is a good sign of a healthy company.

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14
Q

What do you know about your companies accounts ?

A

Cash flow forecasting is the process of obtaining an estimate or forecast of a company’s future financial position; the cash flow forecast is typically based on anticipated payments and receivables

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15
Q

What is created each and submitted each year ?

A

As part of the companies Act 20006 a company ahs to return annual account

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16
Q

Can you run me though your company accounts ?

A

Company accounts are a summary of an organisation’s financial activity over a 12 month period. They are prepared for Companies House and HM Revenue & Customs every year and consist of the Balance Sheet, the Profit and Loss Statement, and the Cash Flow Statement

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17
Q

How do you calculate utilisation ?

A

The basic formula is pretty simple: it’s the number of billable hours divided by the total number of available hours (x 100). So, if an employee billed for 32 hours from a 40-hour week, they would have a utilization rate of 80%.

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18
Q

What is a cash flow forecast ?

A

Cash flow forecasting, also known as cash forecasting, is a way of estimating the flow of cash coming in and out of your business, across all areas, over a given period of time. … A short-term cash forecast may cover the next 30 days and can be used to identify any funding needs or excess cash in the immediate term.

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19
Q

When should a company be registered for VAT ?

A

If the company a VAT taxable turnover to be greater than £85,000 in the last 12 months or in the proceeding 30 day period.

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20
Q

What is the threshold for being registered to VAT ?

A

£85,000

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21
Q

How much does VAT rise?

A

2.5% (17.5% increased to 20%)

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22
Q

Give me an example of different VAT rates ?

A

Standard rate=20%
Reduced rate=5%
Zero rate=0%

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23
Q

What is the current rate of VAT ?

A

Standard - 20%,
Reduced = 5% such as power bills,
Zero - zero rated goods and services such as children’s clothes.

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24
Q

What is domestic reverse charge ?

A

The domestic reverse charge is a VAT procedure that was implemented in the UK on March 1st 2021 for construction services. Under the domestic reverse charge procedure, the buyer (contractor) accounts for the VAT rather than the supplier (subcontractor). this is try and account for missing VAT payments

25
Q

Who does Domestic Reverse charge apply to ?

A

Main Contractors and Subcontractors

26
Q

What is the VAT reverse charge ?

A

The customer receiving the service will have to pay the VAT due to HMRC instead of paying the supplier if they are VAT registered and part of the Construction Industry Scheme (CIS) - see flowcharts for further info

27
Q

What is the difference between a profit and loss sheet and a balance sheet ?

A

The Profit and Loss account is the statement of income and expenses which shows the net profit and loss for the particular period
Balance sheet is the statement of assets, liabilities and capital which showing the actual financial position of an entity at a certain point in time.

28
Q

What does EBITDA stand for ?

A

EBITDA stands for earnings before interest, taxes, depreciation, and amortization, and its margins reflect a firm’s short-term operational efficiency. EBITDA is useful when comparing companies with different capital investment, debt, and tax profiles.

29
Q

What is a profit and loss statement ?

A

The profit and loss statement is a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period. / • Financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time, usually yearly.

30
Q

What is a balance sheet?

A

It is a snapshot of a companies financial status showing the assets, liabilities, shareholders equity at any given point.

31
Q

Give me some examples of the subject areas of the RICS guidance on Conflicts of Interest.

A

Record Keeping , Information Barriers , Party Conflicts, Informed Consents

32
Q

What is the difference between a profit and loss statement and a balance sheet?

A

A profit and loss shows the income and expenditures of a company and resulting profit or loss.
The balance sheet shows what a company owns (assets) and what it owes ((liabilities) at any given point.

A profit and loss statement summarises the revenues, costs and expenses and a balance sheet shows the value of a business on a particular date and shows what the business owns and owes (assets and liabilities).

33
Q

What do companies need to provide every year to comply with the Companies Act 2006?

A

Accounts for the company at the end of each financial year

34
Q

What is accounting?

A

It is the process of keeping financial accounts of something.

35
Q

What are company accounts?

A

Legal requirement submitted to HMRC. It is a record of the companies financial performance

36
Q

What are management accounts?

A

These are produced for internal usage for particular requirements such as calculating acquisitions. It can be in any format for the purposes of what it is needed for.

37
Q

How do you deliver healthy cashflow?

A

Ensure cash coming in is greater than that going out.

38
Q

What does a Dun and Bradstreet report show?

A

It compiles business information to measure the creditworthiness of a company. They are the business equivalent of a credit report check. It will colour code the companies financial status from green, red or orange/yellow to show their risk.

39
Q

What are the limitations of a Dun and Bradstreet Report?

A

It is limited only to the latest submitted documents on companies house.

40
Q

Why do companies keep accounts?

A

For regulatory purposes, to keep track/record of outgoings and in goings and compare performances and to plan future growth.

41
Q

How are fee proposals prepared?

A

A fee proposal is prepared using an estimate of the time required to carry out a job multiplied by the cost of your hire on an hourly rate. A percentage will then be added for company overheads.

42
Q

What is goodwill?

A

An intangible asset that arises when a buyer acquires an existing business. It represents assets that are not separately identifiable.

43
Q

What is bankruptcy?

A

The legal process where people or companies who cannot repay debts may seek relief from the government of their debt. It is court ordered. It stays on your financial record for up to 10 years

44
Q

What is receivership?

A

The process in which a ‘receiver’ is appointed by a creditor to liquidate company assets to allow creditors to recoup their money.

45
Q

What is retention and why do we keep this?

A

Retention is the withholding of a percentage of a contract sum to ensure the contractor properly completes the activities required

46
Q

What is solvency?

A

The possession of assets in excess of liabilities; ability to pay one’s debts.

47
Q

What is a Cash flow statement?

A

A financial statement that shows all the cash inflow a company receives from operations and external investment. It also shows cash outflow that pays for business activities during a given period.

48
Q

What is a profit and loss statement?

A

A document which shows the amount of income generated against the expenses made during a specified period.

49
Q

What is a balance sheet?

A

It is a snapshot of a companies financial status showing the assets, liabilities, shareholders equity at any given point.

50
Q

What is the difference between a Sole Trader, Partnership, Limited, and a LLP?

A

Sole Trader A person who is the exclusive owner of a business, entitled to keep all profits after tax has been paid but liable for all losses (unlimited liability).-
Partnership A business organization in which two or more individuals manage and operate the business. Both owners are equally and personally liable for the debts from the business.
Limited In a limited company, the shareholders’ liability is limited to the capital they originally invested. If such company becomes insolvent, the shareholders personal assets remain protected. Shares in a private limited company are not offered to the general public (distinguishing it from a public limited company - plc.)
Limited Liability Partnership (LLP)A limited liability partnership (LLP) is a partnership in which some or all partners have limited liabilities. It therefore exhibits elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence.

51
Q

What is VAT?

A

Value added tax, it is charged to companies with a turnover of more than £82,000.00

52
Q

What are Capital Allowances?

A

A sum of money, that can be deducted from a company€™s overall tax corporate or income tax on its profits. Calculated based off the purchase of specific items.

53
Q

Who can claim Capital Allowances?

A
  • Limited Companies- Sole traders
54
Q

What is Insolvency?

A

Where a company is unable to pay its way.

55
Q

What are the signs of insolvency?

A
  • Overvaluing Interim Valuations.- Front Loading.- Dissatisfied workforce.- Asking for upfront payment.- Contractual Approach.
56
Q

Who is employed when a company becomes insolvent?

A
  • Administrator, who will try to keep the company going.- Liquidator, who will wind up the company and sell the assets.
57
Q

What options are available to a company that has gone insolvent?

A
  • Administration.- Company Voluntary Agreement.- Compulsory Liquidations.
58
Q

What is Administration?

A

A method of holding a business together, whilst plans are formed to either restructure the business of sell assets.

3 - MI - Study Cards (20 decks)

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