Accounting

Question 1

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

Answer 1

A profit and loss account shows the incomes and expenditures of a company and the resulting profit or loss.

The balance sheet shows what a company owns (assets) and what it owes (liabilities) at a given point in time.

Question 2

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

Answer 2

Profit and loss account
Balance sheets
Cash flow statements

Question 3

What is the difference between debtors and creditors?

Answer 3

Creditors Your firm owes another firm money e.g. If you owe a sub consultant fees then they are a creditor.
Debtors A firm who owes your firm money e.g. a client who owes you fees is a debtor.

Question 4

What is a cash flow statement?

Answer 4

It is the summary of the actual or anticipated ingoing and outgoing of cash in a firm over the accounting period.
It is broken down into operating, investing and financing activities.
︎It measures the short term ability of a firm to pay off its bills.