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RICS APC RURAL PATHWAY > Accounting Principles and Procedures > Flashcards

Accounting Principles and Procedures Flashcards

1
Q

What are the three types of financial statement you may come across relating to a company?

A

Balance Sheet
Income Statement
Cashflow forecast

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2
Q

What is a balance sheet?

A

shows a company assets and liabilities & shareholder equity

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3
Q

What is an income statement?

A

profit and loss account

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4
Q

What is a Cash flow statement?

A

summaries a companies income and out goings over a period of time

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5
Q

What is an asset/liability?

A

an asset is a resource that the company owns/controls
a liability is a debt or financial obligation that a company owes to another entity

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6
Q

Can you give me an example of an asset?

A

Livestock
Cash in bank
Supplies

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7
Q

Can you give me an example of a liability?

A

debts
loans
wages

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8
Q

What do you understand by the term Generally Accepted Accounting Principles? GAAP

A

a set of accounting rules companies use when preparing their financial statements

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9
Q

What are the main GAAP principles?

A
  • Consistency
  • Periodicity
  • Materiality
  • Continuity
  • Non-compensation
  • Regularity
  • Continuity
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10
Q

How do comapnies know which frame work to comply with?

A

dependent on how the company is registered with Companies hosue

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11
Q

Which reporting framework do public limited companies have to comply with?

A

International financial reporting standarfs

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12
Q

How would you assess the financial strength of an entity e.g. for a valuation?

A
  • Study their financial statements
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13
Q

Can you tell me about a common financial measure?

A

working capital ratio measures liqudity of a business
current assets - current liabilities = working capital
current assets/current liabilities = working capital raito

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14
Q

What is liquidity?

A

how easil a company can convert assets into cash to pay short term obligations

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15
Q

What is the Acid test?

A

measure of liquidty
represents a companies ability to pay current liabilities with assets than can be coverted to cash quickly
calc
current assets - inventory pre paid expenses/current liabilities

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16
Q

What is the ROCE?

A

Return on capital employed
Measures how well a company uses its capital to generate profits
divide earnings (before tax) by capital spent

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17
Q

What is gearing ratio?

A

measures how much debts a company uses to finance its operations
measurs financial risk & stability
25 - 50% normal high is more risky
deivide total debt by total shareholder equity

18
Q

What is the net assets per share fianancial measure?

A

represents the value per share of a mutual fund or etf
divide net asset by number of equity shares

19
Q

Can you tell me what the role of an audior is?

A

obtain reasonable assurance about wheather the financial statements as a whole are free from material misassessment

20
Q

When are audited accounts needed and why? (ltd)

A

if turnover is more than 10.2 mil
assets are worth more than 5.1 mil
if more employees than 50
at least 2 of these

protect from fraud

21
Q

How do public limited company accounts differ? (plc)

A

They are always required to have an audit regardless of threshold

22
Q

Tell me something you understand from the companies act 2006.

A
  • private companies no longer require an AGM or a company secretary
  • longest act ever passed
23
Q

Tell me what it means to prepare accounts in accordance with the IFRS.

A

The goal of the IFRS is to create a common acconting language that can be understood globally

24
Q

What is the different between the UK GAAP and the IFRS?

A

GAAP is uk base IFRS is global
GAAP financial reporting for measurement of financial position
IFRS is trying to make everything the same across the world

25
Q

What is the basis of valuation under the IFRS 13?

A

Fair value

26
Q

What is fair value?

A

the price that would be received to sell an asset or or paid to trasnfer a liability in an orderly transaction between market participants at the measurement date

27
Q

What are statutory accounts?

A

a set of financial reports that summarise a companies financial perforamce over a period of time they are prepared at the end of the companies financial year and submitted to HMRC

28
Q

Why is good financial record keeping important to you?

A
  • helps provide an overview of the business
  • good record keeping makes viewing of information quicker, easier and less time consuming
  • less chance of thinks being incorrect
29
Q

Tell me three ways you ensure that client’s money is handled properly

A
  • ensure record is kept of all client money held
  • ensure client has access to funds
  • ensure client money dealt with by a responsible principle
30
Q

What RICS guidance or schemes do you adhere to in ensuring client money is handled properly.

A

RICS client money handling 1st ed
Client Money Protection Scheme

31
Q

Talk me through what you would find in farm income accounts.

A

income - sale of livestock/crop/straw
cost - vet/med, feed, fert seed sprays

32
Q

What issues might you encounter in farm accounts?

A
  • missing information
  • cash flow forecasting = poor cash flow in some months
  • undervaluing of labour
33
Q

What factors affect profit and loss in farm accounts?

A

profit
- market prices
- weather/yield
- location
- quality of product
- cropping cycle
Cost
- market costs
- weather/yield
- cropping cycle

34
Q

What government subsidy schemes are you aware of?

A

Basic payment scheme

35
Q

How do significant dates and livestock ages relate to farm accounts

A

significant dates
- english quarter days (rent)
- BPS / scheme payment dates

livestock ages
- value of stock
- period on holding

36
Q

What do you understand by the UK Farm classification?

A

groups types of farms together based on type of farm (product) and size of farm to help with agricultural analytics

37
Q

What would you find the farm business survey?

A

information on the financial, physical and econominc performances of farm business in the UK,

38
Q

Tell me about your understanding of gross margins in farm accounts.

A

shown in the P&L account - shows the income and expenses to provide GM

39
Q

What RICS guidance relates to farm stocktaking valuations?

A

RICS Farm Stocktakng Valuations 2nd Ed

40
Q

When may a farm stocktaking valuation be required?

A

end of financial year

41
Q

What is the purpose of a farm stocktaking valuation?

A

identify and carry forward costs that were incurred before the start of the new fiancial year but did not give rise to income until after the year end

42
Q

What is the basis of value of a farm stocktaking valution?

A

fair value less costs to sell

RICS APC RURAL PATHWAY (18 decks)

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