Accounting Principles Flashcards
What are accounting principles applicable to your role?
A basic understanding of balance sheets, profit and loss accounts and cash flow statements.
Balance sheet = reflection of what is happening in the business now
Profit and loss = reflection of what happened in the past
Cash flow = projection of the future of your business
What are audited accounts?
They are accounts which have been audited by a third party accountant to confirm their validity. PLCs have to publish account on an annual basis.
What is a balance sheet?
Shows a businesses assets and liabilities at a given date. What is happening.
Assets = Cash, property, investments Liabilities = Debt, loans, costs
What is a profit & loss account?
A summary of the businesses income and expenditure on an annual basis. What has happened. Revenues less costs and taxes.
What are management accounts?
Held by a business internally as part of the day-to-day management of the business. NOT audited.
What is a cash flor statement?
A forecast of receipts and expenditure, plus VAT in the future.
What is IFRS 16?
International financial reporting standards. This relates specifically to the accounting of leases and how they show on the balance sheet. If +12 months, a liability.
What is the major change caused by IFRS 16?
All companies must comply and show the full cost of a lease on their balance sheets. It limits the means that businesses can spread the costs.
What are the main credit agencies?
D&B - Risk of business failure
Experian - Credit worthiness
What is D&Bs best and worst rating?
5A1 and N1
What is the difference between statutory accounts and management accounts?
Statutory must be completed annually and approved by an external auditor, published on companies house.
Management accounts are for the internal workings of a business. They are not verified by an auditor and therefore cannot be relied upon.
What did you learn in your CPD on accounting principles?
More detail on financial terminology as well as looking to develop my understanding of P&L / Balance sheets.
Also basic understanding of metrics like net profit margins etc. Net profit / revenues * 100. What revenue is left after deduction of costs.
What types of companies have to publish audited annual accounts?
All companies have to submit annual audited accounts to companies house on an annual basis
