ACCOUNTING PRINCIPLES AND PROCEDURES Flashcards
What are the three types of financial statement you may come across relating to a company?
Profit and Loss, Balance Sheet, Cash Flow
What is an asset / liability?
Asset is something you own such as office goods / capital. Liability is money that you owe - loans etc.
What is the difference between financial and management accounts?
Financial accounts are external, management accounts are internal.
What do you understand by the term Generally Accepted Accounting Principles (GAAP)?
The standard accounting procedures that must be followed for financial reporting.
How do companies know which reporting framework to comply with?
The Companies Act 2006.
Which reporting framework do public limited companies have to comply with?
International financial reporting standards.
How would you assess the financial strength of an entity, e.g. for a valuation?
Dunn and Bradstreet report.
Can you tell me about a common financial measure?
Ratio analysis (acid test) - quick way of determining financial standing.
When are audited accounts needed and why?
To prove credibility of accounts.
How do public limited company accounts differ?
They have to submit audits themselves, don’t have auditor.
Tell me three ways you ensure that clients’ money is handled properly.
Ringfenced bank account and always accessible.
What is a balance sheet
A financial statement (snapshot in time) showing a companies assets and liabilities.
What is a profit and loss account?
- Companies performance over a period of time
- Usually a fiscal quarter
What is a cashflow?
Cash flow statement – shows money entering and leaving company
Cash flow forecast - The cash flow sets out when costs will be incurred and how much they will amount to during the life of the project.
Important to ensure companied have funds in place
What is insolvency?
When a company can no longer pay its debts.
