Accounting Principles & Procedures

Question 1

What are the contents of a set of public limited company accounts?

Answer 1

Chairmans statement

Independent auditors report

Income statement (profit and loss account)

Statement of financial position (balance sheet)

Corporate governance report

Remuneration report

Other statutory information

Question 2

What is a balance sheet? (statement of financial position)

Answer 2

Is a statement of the businesses financial position showing its assets and liabilities at a given date, usually at the end of a financial year

Question 3

What is an asset?

Answer 3

Can include cash, property, debtors and other investments held

Question 4

What is a liabilities?

Answer 4

Can include borrowings, overdrafts, loans and creditors

Question 5

What is a Profit and Loss Account (Income Statement)

Answer 5

A summary of the businesses income and expenditure transactions, prepared usually on an annual basis

Question 6

What are Management Accounts?

Answer 6

Prepared for internal use by a business and are not audited

Question 7

What are Audited Accounts?

Answer 7

Prepared by a Chartered or Certified Accountant

Question 8

What are Consolidated Account?

Answer 8

These comprise a number of individual subsidiary accounts for a company within a single set of accounts

Question 9

What is a cash flow statement?

Answer 9

This shows all the actual receipt and expenditure to include VAT

Question 10

What is IFRS 16

Answer 10

Accounting change which impacted how occupiers regard their property liabilities

A new lease accounting standard which all companies have to comply with when using the International Financial Reporting Standards

Question 11

What is UK GAAP?

Answer 11

Generally Accepted Accounting Principles

Question 12

What does UK GAAP do?

Answer 12

Provides a framework for the preparation of company accounts in the UK

It is the body of accounting standards published by the Financial Reporting Council (FRC)

Question 13

When was the new GAAP effective from?

Answer 13

1 Jan 15

Question 14

How is IFRS 16 put into practice?

Answer 14

The full cost of leases have to be accounted for on the balance sheet

An occupiers obligation to pay rent has to be recognised as a liability

SC payments would be accounted separately

Question 15

Who does IFRS 16 apply to?

Answer 15

All companies who rent or lease assets for business purposes.

12 + months

Question 16

Purpose of 16 IFRS?

Answer 16

To report accurate information which reflects lease transactions

To allow accurate analysis of cash flows (e.g. amount, timing and uncertainty) relating to leases

Question 17

What are the impacts of IFRS 16?

Answer 17

Increased global comparability of accounts

Question 18

Challenges of IFRS 16?

Answer 18

Collating all relevant lease documentation, e.g. from archives or solicitors, from all entities within a Group company

Question 19

Differences between GAAP and IFRS?

Answer 19

Most UK companies will use UK GAAP FRS 102 to prepare all financial statements as they are less complex and demanding than international standards

So it is less time and cost

However UK companies who are part of a wider international group may choose to apply IFRS standards for consistency

Question 20

When was IFRS introduced?

Answer 20

January 2019