Accounting Principles & Procedures

Question 1

What is a balance sheet?

Answer 1

Statement of financial position, showing assets and liabilities at a given date.

Reports at a specific point in time (usually end of the financial year).

Question 2

What is a profit & loss statement?

Answer 2

Summary of business’ income and expenditure, prepared usually on an annual basis.

Used to assess the profitability of a company.

Over a period of time usually a fiscal year.

Question 3

What is a cash flow statement?

Answer 3

Shows all receipts and expenditure. Measures how well a company manages its cash position.

Measures the performance over a period of time.

Question 4

What is included in a balance sheet?

Answer 4

• Assets include cash, property, other incestments
• Liabilities include borrowings, overdrafts, loans

Question 5

What is included in a cashflow statement?

Answer 5

• Operating activities
• Investing activities
• Financing activities

Question 6

What is VPGA1?

Answer 6

Valuation for inclusion in financial statements.

Question 7

What does VPGA1 state?

Answer 7

Two reporting frameworks:
IFRS - All UK listed companies are required to report to this standard.
UK GAAP - Other entities have a free choice between the two standards.

Question 8

What is the definition of fair value for financial statements?

Answer 8

The amount for which an asset could be exchanged, between knowledgeable, willing parties in an arms length transaction.