Accounting principles (level 1)

Question 1

What are management accounts

Answer 1

They are a accounts prepared by the business and include:

1. balance sheet
2. profit and loss statement
3. cash flow

Question 2

What is a balance sheet

Answer 2

1. A balance sheet show the assets and liabilities of the business
2. Assets- offices, wtw, wwtw, land
3. Liabilities- loans, dept, wages, tax

Question 3

What is a profit and loss statement

Answer 3

a profit and loss statement show income and expenditure to show profit and loss.

Question 4

What is the difference between a balance sheet and profit and loss statement

Answer 4

A balance sheet is more of a snap shot of the overall business at a moment in time whereas a profit and loss statement is a statement of income v expenditure

Question 5

What is a cash flow

Answer 5

A cash flow combines a balance sheet and profit and loss statement to show actual receipts and expenditure inc VAT

Question 6

What is IFRS16

Answer 6

International Financial Reporting Standards

Question 7

How did IFRS16 change the way businesses record leases

Answer 7

Any lease of offer one year needs to be capitalised and recorded.

Impact:

1. leases are now reported on profit and loss statement
2. Dept to equity ratio could change and company may appear to have more dept

Question 8

How do we work out the capitalised figure for lease reporting

Answer 8

We use the LBTT calculator on the revenue Scotland website to get the NPV