Accounting principles and procedures Flashcards
What is GAAP?
It is the generally accepted accounting principles and provides standards and guidelines following the UK’s Company Act 2006.
What would you include when submitting a fee quote?
On issuing a fee quote I would include: scope of services, our duties under CDM regulations, PII details, terms of engagement which includes the payment provisions an obligations, dispute resolution, termination details plus the fee quote and complaints handling procedure.
What is a cash flow statement?
The cash flow provides a review and an analysis of company income and outgoings showing forecasts of creditors and debtors payments, as well as S curve predictions. This includes operating investing and financing activities.
What are Company accounts and what is included?
Company accounts are a summary of activity over a 12 month period for Companies House and HMRC. They include; the chairman’s statements/report, profit and loss accounts, a balance sheet, cash flow statement, and the auditors report
What are the differences between the documents included in the companies account?
A balance sheet includes the review of assets liabilities and shareholder’s equity.
A profit and loss account records the revenue and expenses over a period.
The cash flow statement records incomings and outgoings, forecasting future movements
What is an asset? What is a liability?
An asset is either fixed (long term) or current (short term). A liability is an obligation of debt to pay either long term or a current liability (less than 12 month).
What is the purpose of IFRS 16?
This is the international financial reporting standards which insures liabilities account for new leases since 2019.
What is the difference between management accounts and company accounts?
Management accounts are usually internally, not audited and measures performance, liquidity, and profit and loss accounting.
What is the role of the auditor? And how can you be exempt from an audit?
An auditor examines the company accounts as external charted or certified accounted, ensuring true reflection. Exemption is if you have only an annual turnover of less than 10.2 million, a balance sheet less than 5.1 million, and employees less than 50 staff.
How could you check a Contractors financial abilities for tender?
Review cash in the bank.
Credit score checks.
Ongoing profit annually.
Although, this would be left to the accounts team to do checks as I am not qualified.
What is the purpose of financial reporting?
- Regulate and prevent fraud
- Provides health of a business
- Management of the business
What is capital expenditure?
Money spent on a fixed asset or adding value to one.
