Accounting and Principles Flashcards
What are the three types of financial statement you may come across relating to a company?
income statement, balance sheet, and statement of cash flows are all required financial statements
What is an asset / liability?
Assets are items your company owns that can provide future economic benefits.
Liabilities are what you owe other parties.
Can you give me an example of each?
Assets: Cash, Liabilities: Bank debt
What is the difference between financial and management accounts?
Financial accounting is often historical, focusing on data from the past year, quarter, or month. Management accounting, on the other hand, uses both historical and future data
What do you understand by the term Generally Accepted Accounting Principles (GAAP)?
Is a collection of commonly followed accounting rules and standards for financial reporting.
How do companies know which reporting framework to comply with?
UK GAAP and International Financial Reporting Standard
Which reporting framework do public limited companies have to comply with?
IFRS and UK GAAP.
How would you assess the financial strength of an entity, e.g. for a valuation?
Balance sheets for a profits method of valuation.
Can you tell me about a common financial measure?
Debt to equity ratio - compares a companys total liabilities to its shareholder equity.
Can you tell me what the role of an auditor is?
Auditors provide assurance that financial statements produced by an organisation reflect its operational and financial results
When are audited accounts needed and why?
If they are involved in banking , are a public company, or an authorised insurance company
How do public limited company accounts differ?
Private limited companies have nine months to file their annual accounts whereas public limited companies only have six
Tell me something you understand from the Companies Act 2006.
Encourages the efficient and responsible management of companies
Tell me what it means to prepare accounts in accordance with IFRS.
Provide a unified framework for financial statements, ensuring global consistency and transparency
What is the difference between UK GAAP and IFRS?
UK GAAP: Primarily used by non-listed UK companies
IFRS: Used by listed companies and widely adopted internationally
What is the basis of valuation under IFRS 13?
To work out the fair value.
What is fair value?
The price at which an asset is bought or sold when a buyer and a seller freely agree on a price.
What has changed in relation to lease accounting / IFRS 16?
Under IFRS 16, all leases are recognised on the balance sheet
What is FRS 102? What changes have been made to it?
A new model for lease accounting by lessees
What are statutory accounts?
Are a set of financial reports that companies prepare at the end of each financial year to report to Companies House.
Why is good financial record keeping important to you?
Helps prepare a business running budget and file tax .
Tell me three ways you ensure that clients’ money is handled properly.
Ensure that the account name includes the word ‘client
Hold all client money in an exclusively controlled client money account
Ensure that the account only contains client money paid into it
What RICS guidance or Schemes do you adhere to in doing so?
RICS Professional Statement, Client Money Handling 2019
Is VAT included in a balance sheet or a profit & loss account?
If you are VAT registered, your income and expenses are likely to be shown ‘net’ of VAT
How do you account for the impact of inflation when reporting to clients?
I would comment on it, for example in market commentary in a valuation report. I will discuss the affects of it and on the asset.
