Accounting Principles and Procedures

Question 1

What is a Balance Sheet

Answer 1

Statement of financial position, showing assets and liabilities at any given date (usually end of financial year)
- Assets = Cash, Property, other investments
- Liabilities = Borrowings, overdrafts, loans

Question 2

What is a Profit and Loss account

Answer 2

Summary of business’ income and expenditure, prepared usually on an annual basis

Question 3

Cash Flow Statement

Answer 3

Shows all actual receipts and expenditure, including VAT

Question 4

What are Management accounts

Answer 4

Internal use only, NOT audited and used for decision making – planning for future and forecasting.

Question 5

Financial accounts

Answer 5

For External use and are audited accounts to be sent to HMRC

Question 6

What are Generally Accepted Accounting Principles (GAAP)

Answer 6

Standard accounting rules that accountants must follow when compiling financial statements

Question 7

What should be included in Public Limited Company Accounts

Answer 7

• Chairman’s statement
• Independent auditor’s report
• Profit and loss account
• Balance sheet
• Corporate governance report
• Remuneration report
• Other statutory information

Question 8

Public limited company vs Private limited company

Question 9

What is a statement of profit and loss?

Answer 9

A financial statement that summarises income and expenditure over a specified period telling you how much profit or loss a business is making.

Question 11

What does the balance sheet represent?

Answer 11

The balance sheet is about the assets and liabilities the business has at a specific time.

Question 12

What does the profit and loss account focus on?

Answer 12

The profit and loss account looks at the actual income and outgoings within the business.

Question 13

What does the cash flow statement track?

Answer 13

The cash flow statement looks at the actual cash that passes hands within the business.