Accounting Principles and Procedures L1

Question 1

What are the three primary types of financial accounts?

Answer 1

Balance Sheet
Profit and Loss Account
Cashflow Statement

Question 2

What is a Balance Sheet?

Answer 2

Statement of final postion showing assets and liabilities at a given date.

Assets = Cash, property, investmnets
Liabilities = Loans, overdrafts, borrowing

Question 3

What is Profit and Loss Sheet?

Answer 3

Summary of income and expendiature prepared on an annual basis

Question 4

What is Cashflow Statement?

Answer 4

Shows actual recipts and expenditure of transactions including VAT. Not included in annual accounts however prepared for management purposes.

Question 5

What is EBITDA?

Answer 5

Earnings Before Interest, Taxes, Depreciation, and Amortization

Question 6

What are management accounts and what are they used for?

Answer 6

Prepared for internal use by the business and are not audited. Can help with budgeting, forcasting and buiness planning.

Question 7

What are Financial accounts and what are they used for?

Answer 7

Audited accounts prepared by charted accountant. Used for external stakeholders and is mandatory for Public Limtied Companies.

Question 8

What does a set of public limited company accounts include?

Answer 8

• Chairmans statement
• Inderpendent auditors report
• Balance sheet
• Profit and loss account
• Corperate governance report
• Remuneration report
• Other statutory infomation

Question 9

What is the IFRS 16?

When did IFRS 16 become effective?

Answer 9

International Financial Report Standards
* Sets out how particular transactions and events should be reported in finacial statements

1 January 2019

Question 10

What does IFRS 16 require companies to do?

Answer 10

• Requires cost of lease as a liability on a balance
• Service charge is shown seperatly
• However not required for leases than 12 months

Question 11

What is a covenant strength?

Answer 11

Tenants ability to meet the requirements of a lease, such as rent, service charge and repair obligations

Question 12

What is a D&B rating?

Answer 12

The D&B Rating is an indicator that assesses the credit worthiness of a company based on the financial strength of the business, payment behaviour, age of the company, company size and other important factors

Question 13

What is UK GAAP?

Answer 13

Sets out rule based standards for accountants when preparing finacial statements for UK companies for companies house. I am aware that the main areas are 100-105. There are 10 main principles that relate to how accounts should be complied and presented.

Question 14

What are the 5 GAAP Principles?

RSPCC

Answer 14

1. Regularity
2. Sincerity
3. Periodic
4. Consistency
5. Continuity

RSPCC