Accounting Principles and Procedures Flashcards
What is the difference between a Profit and Loss Account (income Statement) and Balance Sheets (statement of financial position)?
P&L shows income and expenditure, prepared on an annual basis whereas balance sheet is a statement of financial position at a given date, showing assets and liabilities
What information are you looking at when using FAME and D&B, Credit Safe?
Looking at financial stability of a company
What is the purpose of accruing income or expenditures?
The purpose of accruals in accounting is to match revenues and expenses to the time periods during which they were recognized and incurred, as opposed to the timing of the actual cash flows related to them.
Are you able to advise your clients on financial matters?
No, I am not qualified to provide financial advice
What is a cash flow statement?
Shows receipts and expenditure including VAT
What is UK GAAP?
UK Generally Accepted Accounting Principles – the body of accounting standards in the UK
What is IFRS?
International Financial Reporting Standards
What is IFRS 13?
Fair value, adopted when analysing accounts on behalf of accountants
What is the difference between management accounts and statutory accounts?
Statutory accounts are audited, they comprise P&L and balance sheet, and are for both internal and external use whereas management accounts are for internal use, they help business planning and are unaudited
What is a current asset vs. a non-current asset?
Current assets are expected to be converted to cash within a year, non-current assets are those that are considered long-term, where their full value won’t be recognised until at least a year
What is a transfer of going concern?
You are selling a ‘going concern’ if the sale includes everything that is necessary for the continued operation of the business
How do you calculate gross profit margin?
Divide the gross profit by total sales
What is an example of an asset and a liability?
Freehold or leasehold asset
What are the three types of financial statement you may come across relating to a company?
Balance sheets, income statement and cash flow statement
What is IFRS 16?
IFRS 16 is a lease accounting regulation from the International Accounting Standard Board that requires publicly listed companies to include on their balance sheets all leasing contracts with a contract term longer than one year.
