13: UK GAAP

Question 1

What is GAAP? Who made it? What does it consist of?

Answer 1

The rules, regulations, concepts and conventions which govern accounting in the UK

Made up of:
- UK accounting standards
- Company law

The Financial Reporting Council make these. Most important is Financial Reporting Standard 102.

Question 2

Who can use GAAP?

Answer 2

Any company who isn’t a listed company (public companies with a stock exchange listing)

Listed companies must use international accounting standards (IAS/IFRS)

Question 3

What does the Companies Act require in terms of statements?

Answer 3

Statements must be:
- in specific formats
- show a true and fair view

Docs required in statements:
- a profit and loss account
- a balance sheet
- a directors report
- an auditor’s report

Question 4

What must international companies abide by?

Answer 4

IASB set the IFRS and IAS.
- IAS are just older.

A listed company following international standards must also comply with the Listing Rules issues by the stock exchange they are a part of.

Companies following international standards must comply with company law

Question 5

UK: Statement of Profit or Loss?

Answer 5

Profit and loss account, or Income Statement

Question 6

UK: Revenue?

Answer 6

Turnover

Question 7

UK: finance costs

Answer 7

Interest payable

Question 8

UK: Statement of Financial Position

Answer 8

Balance Sheet

Question 9

UK: Non-current assets

Answer 9

Fixed assets

Question 10

UK: Property, Plant and Equipment

Answer 10

Tangible Assets

Question 11

UK: Carrying amount/value

Answer 11

Net book value

Question 12

UK: Inventory

Answer 12

Stock

Question 13

UK: Receivables

Answer 13

Debtors

Question 14

UK: Allowance for receivables

Answer 14

Provision for doubtful debts

Question 15

UK: Irrecoverable debt

Answer 15

Bad debt

Question 16

UK: cash and cash equivalents

Answer 16

Cash at bank/in hand

Question 17

UK: Retained Earnings

Answer 17

Profit and Loss Account

Question 18

UK: Non-current liabilities

Answer 18

Creditors falling due in more than 12 months

Question 19

UK: loan notes

Answer 19

Debentures

Question 20

UK: Current liabilities

Answer 20

Creditors calling due in less than 12 months

Question 21

UK: payables

Answer 21

Creditors

Question 22

How do the brits format their balance sheets?

Answer 22

Top part is net assets:
+ fixed assets
+ current assets
- current liabilities
- long-term liabilities

Bottom part is shareholders’ funds:
+ share capital
+ reserves

Question 23

How the brits do a profit and loss?

Answer 23

Basically exactly the same!

There may be ‘interest receivable and similar income’ above finance costs.

There may also be ‘other operating income’ with expenses.