Accounting Principles Flashcards
What is a financial account
reports company transactions
often profits and loss
-balance sheet
-cash flow statement
What is a credit check
-details about finances
e.g existing debts
credit available
What is a profit and loss statement
-Shows the money the money that has come in and gone out over a specific period
-Shows how the income (top line) is transformed into the bottom line (profit) after all expenses and revenues have been deducted over a set period of time.
Why is a profit and loss useful?
Allows comparison to previous years
What is a balance sheet
-A snapshot of a companies financial position
-A financial report which summarises the companies financial position at a specific point in time.
-It details the companies assets and liabilities at a specific point in time
What assets would you find on a balance sheet
-cash, property and other investments
What liabilities would you find on a balance sheet
-Borrowing, overdrafts, loans
What does a balance sheet show?
-Can a company pay bills on time
What is a cash flow statement
- a financial report that shows where a business’ money is coming from and going
Whats the difference between a cash flow statement and balance sheet
-Balance sheet = specific point in time
-Cash flow = period of time
-Profit and loss = period of time
What is an asset valuation
Asset valuation is the process of determining the current value of a company’s assets
What is management accounting
Aimed at internal users such as management or board of director’s.
a method of accounting that creates statements, reports, and documents that help management in making better decisions related to their business’ performance.
Why are accounting principles relevant to your pathway
-Could set up own practice so basic knowledge is required
-At Lidl accounting principles are required for business partner checks for buying selling sites and when using any external consultants
What accounts must a private company need to issue
-balance sheet
-profit and loss
What is the role of an auditor
-independent report as to whether the company has prepared its financial statements in accordance with Company Law
What is UK GAAP?
Regulation body establishing how company accounts must be prepared in the UK
What is ratio analysis
Purpose is to assess a companies financial stength
Measures the ability of the company to pay off current liabilities by converting assets into cash
Where would you go to check the cov strength of a company?
Dunn and Bradstreet
Whats the difference between management accounting and financial accounts
-Management accounts are internal
-Financial are required by law
What is insolvency
-inability to pay debts
What is companies house
-Limited companies
What are the limitations of Dunn and Bradstreet Credit checks
-It is limited only to the latest submitted documents on companies house.
what is the definition of an income statement?
An income statement shows a business’s profits and losses
