Accounting Principles and Procedures Flashcards
What is the purpose of company accounts?
1) To monitor financial movement and allow for reporting on current progress
2) Allows WS to monitor financial strength of the contractors / employers
What are statutory accounts?
Companies accounts required by Law
What is VAT?
Value added tax
consumption tax placed on a product whenever value is added at each stage of the supply chain from production to point of sale
What is corporation tax?
Corporation tax is paid by businesses in the UK
Calculated on their annual profit in a similar way to income tax for individuals
What is an audit?
Process used to check a persons or companies compliance with policy, procedures and compliance with regulation
Why are audits performed?
To ascertain the validity and reliability of information
What is turnover?
Income or revenue that a company receives from its normal business activities
usually from sales of goods and services to customers
What are management accounts?
Accounts prepared by a company for internal management use
OR accounts prepared for a lender such as a bank to evaluate how the business will repay the funding
Whats the difference between management and financial accounts?
Financial accounting meant for external stakeholders
Management accounting is presented internally
Why does a business keep company accounts?
1) Tax purposes (required by law)
2) Demonstrates companies financial standing
3) To ensure cash flow and profitability in a company is being properly managed
What is an escrow account?
Separate account owned by a third party - held on behalf of two other parties
Can be used as a project bank account
What are overheads?
Indirect costs or fixed expenses of operating a business rent / leasing costs utility bills staff salaries insurance
Explain the principles of tax depreciation?
Depreciation expense claimed by taxpayer on a tax return to compensate for the loss in value of the tangible assets
Property / Plant / Equipment
