Accounting & Principles Flashcards
What is a Profit and Loss (P&L)?
A P&L is an account which records the income and expenditure of a business over a certain period of time.
What is the accounting year?
5th of April - 6th of April
What is a Balance Sheet?
A quantitate summary of a businesses financial position at a certain point in time.
It lists the assets, liabilities and owners equity.
Why are accounts needed?
- To meet legal duties & obligations
- Calculate how much tax is owed to HMRC
- Show investors how a business is doing
- Meet your duties to the RICS
What must a Private Limited Company’s Statutory Accounts include?
A balance sheet, a profit and loss account, notes about the accounts and a directors report
Who must the statutory accounts be sent to?
All shareholders, people who can go to the company’s general meetings, Companies House and HM Revenue and Customs (HMRC) as part of your Company Tax Return
Do they need to be audited?
Yes - by a third party accountant.
What does HMRC stand for?
His Majesty’s Revenue & Customs
How is VAT dealt with in a P&L?
It is excluded from the P&L
Which body of regulation establishes how company accounts must be prepared?
Generally Accepted Accounting Principles (GAAP)
What is a Cash Flow Statement?
A statement showing the performance of funds over the accounting period.
What is the definition of equity?
Equity represents the net value of a company, meaning the amount that would be returned to shareholders if all the company’s assets were liquidated, and its debts repaid.
What is the current UK Bank interest rate?
5%
What is the difference between a profit and loss and a balance sheet?
A balance sheet reports a company’s assets, liabilities and shareholder equity at a specific point in time. A profit and loss (P&L) statement summarises the revenues, costs and expenses incurred during a specific period of time.
