Accounting Principles and Procedures Flashcards
What is the difference between Management and Company Accounts?
- Company accounts are financial accounts required by law and audited by a Chartered Accountant.
- Management accounts are use internally by managers for the purpose of the business.
What is IFRS 16?
International Financial Reporting Standards (IFRS) for lease accounting that was introduced in January 2019 by the International Accounting Standards Board (IAS).
It sets out the principles for the recognition of measurement, presentation and disclosure on balance sheets. Objective is to ensure all leased assets are reported on for transparency of assets and liabilities.
What is a balance sheet?
Snapshot of financial position showing assets and liabilities.
Assets are things that the business owns that you get a future benefit from like property, brand or goodwill.
Liabilities are things that the business owes due to past transactions such as wages and loans.
What is a profit or loss sheet?
Summary of income and expenditure for a period of time (usually a year). P&L accounts demonstrate how the revenue is transformed into the net income.
Revenue is income reviewed from business activities.
Expenses are outgoings that arise as the entity performs its business activities.
What is the accruals concept?
Income is recorded when earned, not when received.
Expenditure is recorded when incurred, not when paid.
What is stipulated with records to accounts under the Company’s Act 1985?
Limited companies must provide their year-end accounts in accordance with a legal format.
What is cash flow and why is it useful to businesses to review?
Cash flow shows the actual receipts and expenditure and includes VAT.
Reviewing cash flow can identify shortfalls in cash balance ensuring they can afford to pay suppliers and employees.
What RICS Information is there on IFRS 16?
RICS Practice Information on IFRS 16: Principles for UK Real Estate Professionals (2022) which explores the application of IFRS 16 Leases.
