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RICS APC - 2023 > Accounting > Flashcards

Accounting Flashcards

1
Q

What is a cash flow?

A

The movement of money in and out of a business.

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2
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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3
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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3
Q

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

A

Profit & loss account
Balance sheet
Cash flow

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4
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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5
Q

What legislation is there regarding accounting principles?

A 
Companies Act
Accounts Act
Construction Act
Housing Grants Act
Local Democracy Act
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6
Q

How can you assess the financial 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.

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7
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

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8
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

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9
Q

What is GAAP

A

General Accepted Accounting Procedures

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

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10
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

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11
Q

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

A

In Balance sheet only

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12
Q

What does a balance sheet (statement of financial position) show?

A

Statement of the business’s financial position showing its assets and liabilities at a given date, usually at the end of a financial year
• Assets: cash, property, debtors and other investments
• Liabilities: borrowings, overdrafts, loans and creditors

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13
Q

What does a profit and loss account (income statement) show?

A

Summary of the business’s income and expenditure transactions, prepared usually on an annual basis
Recorded on an accruals basis i.e. revenues are reported when they’re earned

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14
Q

What does the cash flow statement show?

A

Shows actual receipts and expenditure. It is not included in the annual accounts but is prepared for management purposes

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15
Q

What are the three primary types of financial accounts?

A
  • Balance Sheet
  • Profit and Loss Account
  • Cash flow statement
16
Q

What does a P&L and Balance Sheet show?

A

P&L shows revenue and expenses over a period of time. Balance sheet shows assets, liabilities and shareholder equity. Snapshot of company’s finances, what it owes and owns. Investors use them to calculate rates of return, ratios

17
Q

What does a cash flow statement?

A

reports the cash generated and spent during a specific period of time. acts as a bridge between the income statement and balance sheet by showing how cash moved in and out of the business.

18
Q

Why are they useful

A

Help you manage your finances. Balance sheet keeps you and stakeholders informed of financial standing to help you make better decisions, improve the healh of your business.

19
Q

What is the role of an auditor?

A

Examine and verify the financial records and reports of an organization to ensure that they are accurate and comply with the relevant laws and regulations.

20
Q

IFRS Accounting:

A

International Financial Reporting Standards, a set of global accounting standards for transparent and comparable financial statements.

IFRS is principle-based and often requires more detailed disclosures

21
Q

How would you assess the financial strength of an entity

A

review business accounts to provide data for ROCE

Return on Capital Employed (ROCE) - a financial ratio that can be used to assess a company’s profitability and capital efficiency.

EBIT/(total assets minus current liabilities)

RICS APC - 2023 (20 decks)

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