Accounting Principles and Procedures Flashcards
Why should you keep company accounts?
- To keep track of money coming in and out
- To monitor profit and loss
- Future business planning
- Highlight any problem areas of the company so they can be reviewed and solved
- To submit annual financial statements to Company House.
In accordance with the Company’s Act, 1985 limited companies must provide their year-end accounts in accordance with a legal format
What is the difference between management accounts and company accounts?
Management accounts are compiled and used internally by the managers of the business.
Unaudited accounts are prepared externall by an accountant.
Audited accounts are prepated externally by accountants who are also registered as auditors.
Mentioned in submission
What is a balance sheet?
- A balance sheet is a statement showing a business’s financial position at a point in time.
- It shows a business’s assets and liability at a given date
Mentioned in submission
What is a profit and loss account?
P and L accounts demonstrate how the revenue is transformed into net profit
Mentioned in submission
What is a cash flow statement?
- Cashflow shows the actual receipts and expenditure and includes VAT
- Can highlight cash balance shortfalls.
- Reviewing cashflows can help ensure businesses can afford to pay suppliers and employees
- Struggling companies to review weekly
- Healthy companies to review weekly or monthly
What is the difference between a Sole Trader, Partnership, or Limited Company and an LLP?
Sole Trader
A person who is the excludive owner of a buisness, entitled to keep all profits after tax but liable for all losses. (Unlimited Liability).
Partnership
A business organisation in which two or more individuals manage and operate the business. Both owners are equally personally liable for the debts from the business.
Limited
In a limited company, the shareholder’s liability is limited to the capital they originally invested. If the company becomes insolvent, the shareholder’s personal assets remain protected.
Limited Liability Partnership (LLP)
An LLP is a partnership where some or all partners have limited liabilities. One partner is not responsible for another patner’s misconduct or negligence.
CIISCRO Mentioned in submission
What does a set of PLC company accounts typically contain?
- The Chairman’s statement
- Independent Auditors Report
- Income Statement (P&L Account)
- Statement of Financial Position (Balance Sheet)
- Corporate Governance Report
- Remuneration Report
- Other statutory information
(CIISCRO)
What is IFRS 16 and why does it matter to property?
IFRS 16 (International Financial Reporting Standards) came into effect in 2019. It changed the way that a lease was recorded on the balance sheet.
Previously a cost for renting property would have been recorded on the income statement, affecting profit and loss.
Now a lease is recorded as a depreciating liability on the balance sheet, the liability is largest at the start of the lease.
How short does a lease have to be for IFRS 16 not to apply?
When a lease is shorter than 12 months
Mentioned in submission
What does a Dun and Bradstreet report show?
It shows their assessment of a company’s financial strength. Using this I can determine how the investment market would view this information.
I cannot judge the company’s overall financial position as I am not a Chartered Accountant.
Mentioned in submission
What is a credit report?
A Dun and Bradsheet credit report contains a company score and a risk assessment of the company
Give me an example of business credit scoring company:
Dun and Bradstreet
What is the difference between a public limited company (PLC) and a private limited company (LTD)?
PLCs are owned by shareholders and managed by directors. Members of the public can buy shares.
LTDs do not publicly trade shares and is limited to a maximum of 50 shareholders.
What is the threshold that requires a set of audited accounts?
PLCs: must always be audited
LTDs: either; turnover exceeds £10.2m; total assets in excess of £5.1m; employ over 50 people
What is the role of the auditor?
To check that accounts are correct and comply with the law (IFRS standards)
