Accounting Principles and Procedures – Level 1:

Question 1

Can you briefly explain the difference between a Profit & Loss statement and a balance sheet?

Answer 1

• A balance sheet shower assets and liabilities including shareholder equity at a specific time. A profit and loss statement summarises a companies revenues, costs and expenses during a specific period of time.

Question 2

• What is IFRS?

Answer 2

International Financial Reporting Standards which sets common rules so that financial statements can be transparent and comparable around the world.

Question 3

• Can you briefly describe what a cash flow statement is and why its useful to businesses?

Answer 3

• A cash flow statement merges balance sheet and income statements to show actual receipts and expenditure including VAT.
• It provides details of income and expenditure.
• Helps on decision making.
• Allows a company to plan ahead.
• It helps with budgeting.

Question 4

• What do you understand by the accruals concept?

Answer 4

• This is the recording or income and expenditure when they occur and not when they are received or paid.

Question 5

• What are the obligations that a company has with Companies House and HMRC along with the VAT threshold?

Answer 5

• Accounts have to be submitted annually
• Returns are submitted quarterly.
• VAT threshold is £85,000.

Question 6

• What current challenges is Covid and/or Brexit bringing to Accounting Principles?

Answer 6

• Lots of sectors have been decimated in the pandemic.
• Personally, I have not had any problems, but that could all change once the stamp duty comes to an end. Although I await to see the impact of 95% mortgages.