Accounting Principles

Question 1

What are the key financial statements that companies provide?

Answer 1

1. Cash flow forecast
2. Balance sheet
3. Profit and loss accounts

Question 2

What are the differences between a P&L, balance sheet and cash flow forecast?

Answer 2

P&L = shows income and expenditure resulting in profit and loss

Balance sheet = shows the companies assets and liabilities at a certain point in time.

Cash flow forecast = summary of actual or anticipated incomings and outgoings over an accounting period

Question 3

What is the difference between management and financial accounts?

Answer 3

Management accounts - for internal use to assist the management

Financial accounts - company accounts required by UK law

Question 4

What are GAAP and IAS?

Answer 4

GAAP = Generally accepted accounting principles

IAS = International accounting standards

Question 5

What is the VAT threshold for companies?

Answer 5

Turnover of £90k

Question 6

What is an auditor?

Answer 6

An accountant who reviews accounts to understand internal company controls and policies. Prevents fraud, collusion and omissions.

Question 7

What headings would you expect to see in a cash flow forecast?

Answer 7

Income, expenditure, opening balance, net cash flow, closing balance