ACCOUNTING Flashcards
What are the three types of financial statements you may come across relating to a company?
Income Statement (Profit and Loss Statement) - revenues and expenses over a specific period, typically a quarter or a year.
What is an asset / liability?
Asset: Anything a company owns that has value and can provide future economic benefits, such as cash, inventory, or property.
Liability: A company’s obligations or debts that it needs to pay in the future, like loans, accounts payable, or mortgages.
What is the difference between financial and management accounts?
Financial accounts are made public, includes financial statements like the income statement, balance sheet, and cash flow statement.
Management accounts are internal - often non standardised and relevant to specific business.
What do you understand by the term Generally Accepted Accounting Principles (GAAP)?
Generally Accepted Accounting Principles (GAAP) are a set of standardised rules and guidelines used in financial accounting to ensure consistency
How do companies know which reporting framework to comply with?
Public companies generally follow IFRS, while private companies may follow GAAP or other national standards.
Which reporting framework do public limited companies have to comply
with?
Public limited companies (PLCs) must comply with the International Financial Reporting Standards (IFRS).
Can you tell me what the role of an auditor is?
The role of an auditor is to independently examine and verify a company’s financial statements to ensure they are accurate, fair, and in compliance with relevant accounting standards
Tell me what it means to prepare accounts in accordance with IFRS
it means creating financial statements that follow a set of globally recognized accounting rules
Tell me something you understand from the Companies Act 2006.
Governs how companies are formed, operated, and dissolved.
It outlines the legal responsibilities of directors, rules for financial reporting.
One important aspect is that it sets duties for directors to act in the best interests of the company
Explain your understanding of the VAT domestic reverse charge for building and construction services.
Tax measure designed to combat VAT fraud in the construction industry
Customers account for VAT rather than the supplier.
Applies to companies signed up for CIS
Is VAT included in a balance sheet or a profit & loss account?
VAT affects the balance sheet as it reflects amounts owed to or from HMRC, but does not directly impact the profit or loss figures.
How do you account for the impact of inflation when reporting to clients?
Use inflation adjusted figures.
Distinguish between real values and nominal adjusted.
