Accounting Flashcards
What is the difference between Profit and loss vs balance sheet?
Balance sheet = A “snapshot” of a companies financial position at a given point in time.
Profit and loss = A companies revenue and expenses over a particular period, so over one month or a few months.
What is a balance sheet?
A snapshot of a companies financial position at a given point in time.
It shows the company’s net worth and overall financial health by recording assets, liabilities, and shareholder equity.
What is included within a balance sheet?
A companies assets, liabilities, and shareholder equity.
What is CAPEX vs OPEX?
Capex = Capital expenditure - money spent to acquire or improve an asset, such as a building or plant.
OPEX = Day to day Operating costs such as bills, rent.
What are capital allowances?
The practice of allowing taxpayers to get tax relief.
Why are CAPEX and OPEX budgets split in company accounts?
They have different tax obligations, ie CAPEX can benefit from capital allowances.
Why is it important for surveyors to understand company accounts?
- For assessing the financial health of competing surveying practices.
- To assess financial stability of tendering contractors
- To aid in preparing company accounts within their own surveying practice.
Why do businesses keep company accounts?
- Tax purposes (required by Law)
- Demonstrates the company’s financial standing
- Ensure cashflow and profitability are correctly managed
What are some types of accounting ratio’s?
Liquidity Ratio
Profitability Ratio
Gearing Ratio
What is a liquidity ratio?
Ability to turn assets into cash (liquid).
What is a profitability ratio?
Used to assess a businesses ability to generate a profit in relation to its revenue, operating costs, balance sheet assets or shareholder equity.
What is a gearing ratio?
Compares a companies borrowed funds to its equity.
What is a project bank account?
Accounts that allow for payments to be made to the Contractor and members of the supply chain.
