Accounting principles and procedures (Level 1) Flashcards
Three types of financial statement?
- Balance Sheet
- Profit and Loss Account
- Management Accounts
What is an asset / liability?
Assets are resources (tangible and intangible) that your business owns.
Asset: Cash, Property, Debtors
Liabilities are your business’ debts or obligations which you need to fulfil in the future.
Liabilities: Borrowings, overdrafts, loans and creditors
Difference between financial and management accounts?
Management accounts are for internal purposes and are not audited.
Generally Accepted Accounting Principles (GAAP)?
- financial reporting framework adopted by some companies in the UK. It is issued by the Financial Reporting Council and has seven Financial Reporting Standards (FRS): 100, 101, 102, 103, 104 and 105.
How do companies know which reporting framework to comply with?
How would you assess the financial strength of an entity e.g for a valuation?
A common financial measure?
What is the acid test / ROCE / working capital ratio / gearing ratio / net assets per share?
Role of an auditor?
When are audited accounts needed and why?
How do public limited company accounts differ?
Companies Act 2006?
What does it mean to prepare accounts in accordance with IFRS?
- IFRS 16 lease accounting standard
- full cost of leases to be accounted for on the balance sheet.
- Occupiers obligation to pay rent has to be recognised as a liability
Difference between UK GAAP and IFRS?
Basis of valuation under IFRS 13? and what is fair value?
IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price)
What is the difference between a company account and a client account?
Client
- Separate
- If discrete then has Client name in account
- Have to be reconciled
- Cannot go overdrawn
Who is the Money Laundering Reporting Officer in your firm?
- Alasdair Dunne
- oversee all aspects of our anti-money laundering functions and
ensure that any actual or suspected case of money laundering is reported to NCA with immediate effect.
What are the Generally accepted accounting principles (GAAP)?
- Standards that encompass the details and legality of corporate accounting.
What are management accounts?
Detailed report of a business financial health and operational efficiency. Projections.
When should management accounts be prepared?
Prepared monthly or quarterly.
What are annual accounts for a private limited company?
Summary of an organisations financial activity over a 12month period.
Prepared every year including, balance sheet profit and loss statement and cash flow statement.
What is a balance sheet?
Snapshot of assets and liabilities plus shareholders equity at a specific moment in time.
What’s owned by what’s owed/
On a balance sheet, what is an asset?
Something that is owned by your organisation.
Land, property and vehicles.
Stock, petit cash, cash in bank.
On a balance sheet, what is a liability?
Obligation (debt) that will need to be repaid.
What is a profit and loss statement?
Records performance over a period of time.
Includes total revenue and total expenses through financial year.
What is a cash flow statement?
Explains cash movements in the business over the financial year.
When is a statutory financial audit required?
Annual independent inspection of company accounts, required by law.
Done by registered auditor.
Exception: if company is below threshold.
