Accounting principles and procedures Flashcards
What is an income statement/ profit and loss account?
Financial statement showing the income and expenditure during a particular period.
What is a balance sheet/ statement of financial position?
Statement of business’ financial position, showing assets, liabilities and ownership interests.
What is a cash flow?
Movement of cash into or out of an account or business or investment.
Calculation of income statement
Revenue - expenses
How often is an income statement prepared?
Annually
When is a statement of financial position usually undertaken?
End of financial year
Shows a point in time
What is the importance of cash flow?
Showing how cash is generated and spend during a period of time.
Bridge between income statement and balance sheet.
Types of cash flow?
- Operating cash flow
- Investing cash flow
- Financing cash flow
Information obtained from Creditsafe
- Turnover
- Pre-tax profit
- Shareholders funds
What are shareholders funds?
The residual value of a company’s asset after all its liabilities are met.
What is IFRS 16?
Lease accounting standard stating that full cost of leases must be accounted for on the balance sheet.
IFRS 16 exemptions
If lease is 12 months or shorter
What is 3 years profit test?
Net profit of business must be 3 times the rent for 3 consecutive years.
What is meant by ‘covenant strength’?
The strength of the tenant based on their financial performance.
Why is it important to assess the covenant strength?
Covenant affects security of their income/ investment.
Affects the capital value and investment yield.
