Accounting Principles & Procedures

Question 1

What would you find on a companies accounts ?

Answer 1

• Chairman statement
• Independent Auditors Report
• Income Statement (Profit & Loss)
• Balance Sheet
• Corporate Governance Report

Question 2

What is a balance sheet ?

Answer 2

This is one of 3 key financial statements.

A balance sheet shows a company’s assets, liabilities and equity at a specific point in time. It can be used to assess its financial position or health, and be compared with previous balance sheets to identify trends.

Question 3

What are the key financial statements to consider ?

Answer 3

1. Balance Sheet
2. Cash Flow
3. Profit & Loss

Question 4

What is a cash flow statement ?

Answer 4

A cash flow statement shows cash moving into and out of a company for a specific period. This help assess liquidity and shows changes in assets, liabilities and equity.

Question 5

Give examples of financial assets ?

Answer 5

Cash
Property
Debtors

Question 6

Give examples of liabilities ?

Answer 6

• Borrowing
• Over drafts
• Creditors

Question 7

What are profit and loss accounts ?

Answer 7

Profit and loss account is a summary of the businesses income and expenditure, transactions. These are usually prepared yearly.

Question 8

What is the current interest rate ?

Answer 8

4.25%

Question 9

What does the term equity refer to?

Answer 9

It is effectively the value that the owner – such as a company director – has in the business/property.

Question 10

What are the two financial reporting frameworks adopted by UK companies.

Answer 10

IFRS - International Financing Reporting Standards
GAAP - Generally Accepted Accounting Practice

Question 11

What does IFRS 16 deal with?

Answer 11

Leases are dealt with by IFRS 16 Leases, which took effect in January 2019.

This essentially brought all leases over a year on to the balance sheet.

The aim of IFRS 16 is to ensure accurate reporting of lease transactions and to allow more accurate analysis of related cash flows. .

Question 12

What are management accounts ?

Answer 12

Produced for the owners or managers of a business on a monthly or quarterly basis to inform decision-making and business planning.

Question 13

What is a yield ?

Answer 13

This is the rate of return on an investment.

Question 14

What is Graham + Sibbald ?

Answer 14

Limited Liability Partnership (LLP).

Limited liability partnerships (LLPs) allow for a partnership structure where each partner’s liabilities are limited to the amount they put into the business.

Limited liability means that if the partnership fails, then creditors cannot go after a partner’s personal assets or income.

LLPs are common in professional businesses like law firms, accounting firms, medical practices, and wealth managers.

Question 15

Name some important Accounting Ratios?

Answer 15

ROCE
Current Ratio
Profit Margin
Gearing Ratio