Accounting Principles

Question 1

What is a Profit & Loss Statement?

Answer 1

A profit and loss account shows the incomes and expenditures of a company and the resulting profit or loss.

Question 2

What is a balance sheet?

Answer 2

The balance sheet shows what a company owns (it’s assets) and what it owes (it’s liabilities) at a given point in time.

Question 3

What is a cashflow statement?

Answer 3

• It is the summary of the actual or anticipated ingoing and outgoing of cash in a firm over the accounting period.
• It measures the short-term ability of a firm to pay off its bills.

Question 4

What is the difference between debtors and creditors?

Answer 4

• Creditors are business entities that are owed money by another entity that they have extended credit to.
• For example if you have provided services to a client and they owe payment of your fees, you become a creditor to that client.
• Debtors are business entities that owe money to another respective company.
• For example if you have used a sub-consultant and still owe them payment of their fees then you become a debtor of the sub-consultant.

Question 5

What is a cashflow forecast?

Answer 5

• A cash flow forecast summarises the amount of cash or cash equivalents entering and leaving a company or project entity.
• On construction projects they usually show as an ‘S’ curve.
• There is typically a small financial outlay at the start, a steep increase during the midway point and a taper towards the end.

Question 6

What is a Business Plan?

Answer 6

• A formal statement of the business’s goals with reasons why they are thought to be attainable and the plan for reaching the goals.
• The business plan also provides employers with a common ground to focus