Accounting Flashcards
What are current assets?
Cash Accounts recoverable Inventory Supplies Prepaid insurance
What are current liabilities?
Notes payable Accounts payable Wages payable Interest payable Unearned revenues
What are the types of assets? Give exmples.
Current assets. Are expected to be consumed within one year:
- Cash
- Accounts recoverable
- Inventory
- Supplies
- Prepaid insurance
Non-current asstes (long term assets). Are expected to to continue to be productive for a business for more than one year:
- tangiable fixed asstes (vehicles, buildings, inventory)
- non-tangianble fixed assets (copyright, patents, trademarks)
- goodwill
What is a cash flow?
The movement of money in and out of a business.
What is a balance sheet?
Shows company’s assets, equities and liabilities at one point in time.
What is a profit and loss account?
Shows income, expenditure and profit or loss over a period
What is capital expenditure?
Purchasing of fixed assets - plant / property
What is revenue expenditure?
Utility bills
Staff wages
Temporary office space
What are capital allowances?
A deduction from taxable profits for certain types of capital expenditure.
Sums of money a UK business can deduct from the overall corporate or income tax on its profits.
These sums derive from certain purchases or investments.
Eg. Plant & machinery, computer equipment
How is VAT dealt with in a company account?
A separate VAT account is kept & needs to be up-to-date.
What is VAT reverse charge ?
Where paymets are made net of VAT & Contractor or client paysVAT direct to HMRC instead of supplier of thepruct or service.
Must be:
- CIS registered & in scope
- VAT registered & standard / reduced rate VAT
- An end user
What are the types of insolvency?
Company voluntary arrangements Administration Administrative receivership Company compulsory liquidation Voluntary liquidation
What is included in your company quarterly update?
Management account update on turnover, cost of sales, overheads, profit & cashflow. And VAT return.
What are the key financial statements that all companies must provide?
Profit & loss account
Balance sheet
Cash flow
What is the difference between management and financial accounts?
Management are for business planning / internal use and can include a forecast
Financial are required by law
What are the main types of ratio analysis used to asses financial strength?
Liquidity - Acid test ratio Investments / Shareholders Gearing; exposure to loans Profitability - Balance Sheets Financial; selling stick & using assets
What is the difference between a profit and loss account and a balance sheet?
P&L shows income, expenditure & profit / loss
Balance sheet shows assets & liabilities at a given point in time
What legislation is there regarding accounting principles?
Companies Act Accounts Act Construction Act Housing Grants Act Local Democracy Act
How can you assess the finanancail health of a business?
Dun & Bradstreet credit report - this checks the risk of insolvency and recommended credit line
It uses a traffic light system to score companies.
Also informs on payments to supply chain and if any convictions against a business.
What is working in ‘goodwill’?
It is the basis that consultants work on as they provide a service rather than a product
What is bankrupcy?
The insolvency of an individual
What is Credit Control?
It’s when one party puts an upper limit on the amount of credit they will provide another
E.G A supplier sets a credit limit of £30k to a sub-contractor
What is EPS?
Earnings Per Share
What % of project costs are usually made up be consultant’s fees?
Depends on the type and nature of the project - however a traditonal new build project 10-15%
