Accounting Principles

Question 1

What is GAAP

Answer 1

Generally accepted accounting principles
- refers to accepted accounting principles, standards and procedures and it aims to improve clarity of financial information.

Question 2

What’re the 10 principles of GAAP

Answer 2

Regularity, consistency, sincerity, non-compensation, prudence, continuity, periodicity, materiality, good faith, utmost good faith

Question 3

What is IFRS 16

Answer 3

means that leases are brought on to the balance sheet.

Question 4

What is the format of company accounts

Answer 4

• Cover page
• Contents
• Directors report
• Accountants report
• Statutory profit and loss
• Balance sheet
• Notes to the accounts
• Details profit and loss

Question 5

What is a balance sheet?

Answer 5

• Shows how much a company is worth
• Focusing on: Assets (owns) and liabilities (owes)

Question 6

What are the different types of assets/liabilities found within the balance sheet?

Answer 6

• Fixed assets (long term) equipment like computers
• Current assets (short term) cash, balance at bank, work in progress or sums owed
• Current liabilities & long term liabilities. Generally within a year is a current liability.

Question 7

What is the liquidity test?

Answer 7

Assets / Liabilities

A ratio above 1 generally indicates that the company has enough short-term assets to cover its short-term liabilities, suggesting good liquidity.