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rics apc - erh > Accounting > Flashcards

Accounting Flashcards

1
Q

What are current assets?

A 
Cash
Accounts recoverable
Inventory
Supplies
Prepaid insurance
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2
Q

What are current liabilities?

A 
Notes payable
Accounts payable
Wages payable
Interest payable
Unearned revenues
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3
Q

What are the types of assets? Give exmples.

A

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

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4
Q

What is a cash flow?

A

The movement of money in and out of a business.

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5
Q

What is a balance sheet?

A

Shows company’s assets, equities and liabilities at one point in time.

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6
Q

What is a profit and loss account?

A

Shows income, expenditure and profit or loss over a period

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7
Q

What is capital expenditure?

A

Purchasing of fixed assets - plant / property

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8
Q

What is revenue expenditure?

A

Utility bills
Staff wages
Temporary office space

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9
Q

What are capital allowances?

A

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

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10
Q

How is VAT dealt with in a company account?

A

A separate VAT account is kept & needs to be up-to-date.

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11
Q

What is VAT reverse charge ?

A

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
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12
Q

What are the types of insolvency?

A 
Company voluntary arrangements
Administration
Administrative receivership
Company compulsory liquidation
Voluntary liquidation
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13
Q

What is included in your company quarterly update?

A

Management account update on turnover, cost of sales, overheads, profit & cashflow. And VAT return.

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14
Q

What are the key financial statements that all companies must provide?

A

Profit & loss account
Balance sheet
Cash flow

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15
Q

What is the difference between management and financial accounts?

A

Management are for business planning / internal use and can include a forecast
Financial are required by law

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16
Q

What are the main types of ratio analysis used to asses financial strength?

A 
Liquidity - Acid test ratio
Investments / Shareholders
Gearing; exposure to loans
Profitability - Balance Sheets
Financial; selling stick & using assets
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17
Q

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

A

P&L shows income, expenditure & profit / loss

Balance sheet shows assets & liabilities at a given point in time

18
Q

What legislation is there regarding accounting principles?

A 
Companies Act
Accounts Act
Construction Act
Housing Grants Act
Local Democracy Act
19
Q

How can you assess the finanancail health of a business?

A

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.

20
Q

What is working in ‘goodwill’?

A

It is the basis that consultants work on as they provide a service rather than a product

21
Q

What is bankrupcy?

A

The insolvency of an individual

22
Q

What is Credit Control?

A

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

23
Q

What is EPS?

A

Earnings Per Share

24
Q

What % of project costs are usually made up be consultant’s fees?

A

Depends on the type and nature of the project - however a traditonal new build project 10-15%

25
Q

What is the CIS?

A

Construction Industry Scheme

26
Q

What is a profit and loss account?

A

Shows a company’s income, expenditure and profit or loss at a point in time.
Used to show a point in time to show what rax is owed - corporation tax & VAT

27
Q

What is a balance sheet?

A

Shows company’s assets, equities and liabilities at one point in time.
Used to show what the business owns at a apoint in time and owes and any amount invested

28
Q

What is insolvency?

A

When a firm cannot meet it’s contractual financial obligations when they become due.

29
Q

What is liquidation?

A

A company’s operations are brought to an end and it’s assets are divvied up between it’s creditors and shareholders according to the priority of their claims.

30
Q

How do you produce a cashflow?

A

By plotting forecast expenditure at a point in time against time
Need to establish with client what dates they wish to see on the cashflow, valuation dates or the beginning/middle/end of the month

31
Q

What would it show if actual and forecast differed

A

A change in progress - quicker or slower than forecast.
A potential issues causing a change to the progression of works
Change in sequence of works

Action:
Check % value complete to date against % time complete.
Review drop line on program.

32
Q

How would you assess the financial standing of a contractor

A

D&B financial credit check - establish credit limits, recommended contract value, failture score, submitting accounts in a timely manner, review T/o and profitability.

Request copy of accounts

Companies House check

Internet search

33
Q

Why is it important for a client to understand the forecast cashflow?

A

So that they are aware of what and when payments will be due andneed to draw down funding / payments.
This will allow them to secure funding at the correct time and avoid interest and accelerated funding charges
If the client is self-funding the project it is still important because their capital may be tied up in other assets or could be reliant on incoming revenue

34
Q

What are your company’s quarterly updates?

A 
They contain a snapshot of;
Growth
People
New projects
Market Sector
35
Q

What is GAAP

A

General Accepted Accounting Procedures

Clear, consistent comparable method of accounting …. To ensure financial reportin is transparent and consistent

36
Q

Would you understand by the term ratio analysis?

A

To understand financial position, liquidity,profitiability & risk

37
Q

Can you give me some typical ratio analysis examples?

A

Profitability, liquidity, activity, debt & market.

Liabilities / Total assets - to understand hwo much of comapnaies assets is financed by debt

38
Q

In the UK where are statutory accounts for limited companies required to be filed

A

Companies house & HMRC

39
Q

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

A

Delays to accounts being issued
Many more insolvencies/ companies folding under pressures of covid costs & rising prices
Companies taking loans / furlugh grants and then cant repay them

40
Q

Is VAT incl in a balance sheet or profit and loss?

A

In Balance sheet only

41
Q

When is the apprenticeship levy applicable?

A

When payroll over £3m - 0.5% paid monthly

rics apc - erh (22 decks)

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