3. UK GAAP Terminology and Formats

Question 1

Give the UK GAAP Term for:

Statement of financial position

Answer 1

Balance sheet

Question 2

Give the UK GAAP Term for:

Statement of profit or loss

Answer 2

Profit and loss account or Income statement

Question 3

Give the UK GAAP Term for:

Non-current asset

Answer 3

Fixed Asset

Question 4

Give the UK GAAP Term for:

Carrying amount

Answer 4

Net book value

Question 5

Give the UK GAAP Term for:

Inventories

Answer 5

Stock

Question 6

Give the UK GAAP Term for:

Receivables

Answer 6

Debtor

Question 7

Give the UK GAAP Term for:

Irrecoverable debt

Answer 7

Bad debt

Question 8

Give the UK GAAP Term for:

Irrecoverable debt expense

Answer 8

Bad and doubtful debt expenses

Question 9

Give the UK GAAP Term for:

Allowance for receivables

Answer 9

Allowance for doubtful debts

Question 10

Give the UK GAAP Term for:

Retained earnings

Answer 10

Retained profits (reserve)

Question 11

Give the UK GAAP Term for:

Payables

Answer 11

Creditors

Question 12

Give the UK GAAP Term for:

Non-current liabilities

Answer 12

Creditors: amounts falling due after more than one year

Question 13

Give the UK GAAP Term for:

Current liabilities

Answer 13

Creditors: amounts falling due in less than one year

Question 14

Give the UK GAAP Term for:

Revenue

Answer 14

Turnover

Question 15

Give the UK GAAP Term for:

Finance costs

Answer 15

Interest payable and other similar expenses

Question 16

Give the UK GAAP Term for:

Income tax

Answer 16

Taxation expense

Question 17

What is one of the key differences in the UK GAAP Balance Sheet?

Answer 17

Net assets is presented with current liabilities deducted from current assets, and long term liabilities deducted to arrive at net assets.

Question 18

What is the format of the UK GAAP Balance sheet?

Check p.411 of the textbook

Answer 18

Fixed Assets
- Intangible assets
- Tangible assets

Current Assets

Creditors: amounts falling due within one year

Net Current Assets (liabilities)
Total assets less current liabilities
Creditors: amounts falling due after more than one year

Net assets

Capital and reserves

Question 19

What is the format of the UK GAAP Income Statement?

Check p.412 of the textbook

Answer 19

Turnover
Cost of Sales
Gross Profit
Distribution Costs
Administrative Expenses

Other Operating Income
Operating Profit
Interest Payable and similar expenses
Profit before taxation
Taxation
Profit after taxation

Question 20

What are intangible fixed assets?

Give examples of three types of intangible fixed assets.

Answer 20

Intangible fixed assets represent amounts of money paid by a business to acquire benefits of a long term nature.

Goodwill, licenses and development costs are three types of intangible assets.

Question 21

How is the cost for patent rights or trademarks accounted for?

What is the UK GAAP term for useful life?

Answer 21

If a company purchases some patent rights, or the right to use a trademark, the cost of the purchase can be accounted for as an intangible fixed asset.

These assets are subject to amortisation throughout their useful lives (called ‘economic life’ under UK GAAP).

Question 22

How are tangible fixed assets reported in the balance sheet under UK GAAP?

Answer 22

Tangible fixed assets are shown in the balance sheet at their net book value (i.e., at cost less accumulated depreciation, equivalent to carrying amount under IFRS Accounting Standards).

Under UK GAAP a fixed asset note is normally needed to give the required detail.

Question 23

How are tangible fixed assets presented in the balance sheet under UK GAAP?

Answer 23

Check p.12

Question 24

What term is used for ‘current liabilities’ in the Companies Act 2006?

Answer 24

The term ‘Creditors: amounts falling due within one year’ is used in the Companies Act 2006 to mean ‘current liabilities’.

Question 25

What term is used for ‘non-current liabilities’ in the Companies Act 2006?

Answer 25

The term ‘Creditors: amounts falling due after more than one year’ is used in the Companies Act 2006 to mean ‘non-current liabilities’.