2.4 Accounting Principles and Procedure Flashcards
What is turnover?
income or revenue from normal business activities.
What are business overheads with examples?
Indirect business expenses of operating a business:
Rent / Leasing costs
Utility bills
Staff salaries
Insurance
What is an escrow account?
A bank account that can’t be accessed until certain conditions are met.
What are the three accounting ratios?
Liquidity ratio - ability to turn assets into cash
Profitability ratio - ability to generate earnings relative to revenue
Gearing ratio - proportion of company’s debt to equity
What is the UK GAAP?
Regulatory body that sets how financial accounts should be prepared - UK Generally Accepted Accounting Principles
What are the core financial statements?
Profit and loss
Balance sheet
Cash flow forecast
What is a balnce sheet?
Snapshot of a company’s financial position at a given time. Shows Assets, liabilities and shareholders equity.
What is the differnce between debtors and creditors?
Creditor - lent funds and is owed money.
Debtor - borrowed funds and owes money.
What is a cash flow forecast?
Document that shows how much money you expect to receive and pay out over a set period.
What is cash flow forecast used for?
Make future plans
Keep track of payments
Plan for cash shortfalls
Manage surplus cash
track whether spending is on track
What is a profit and loss account?
Revenue and expense over a period of time.
What is insolvency?
Inability to pay off debts or creditors.
How could you determine the financial standing of a company?
A Dun & Bradstreet(D&B) report - business credit report.
What are the signs of contractor insolvency?
Slowing down works
Supply of materials drying up
Increase in defective work
Change in management
Inflated payment requests
Complaints from subcontractors
What steps should you take in the event of a contractor insolvency?
Inform all parties involved and secure the site.
Inform the bondsman.
Consider stopping pending payments.
Take ownership of any material you have paid for.
Schedule all plant and materials.
Value completed works and any defects.
Monitor loss and expenses incurred by the employer.
Terminate the contract and appoint another contractor.
