Accounting principles & procedures Flashcards
Compare and contrast the information that you find within balance sheets and profit & loss accounts.
- Balance sheet is a snap shot of a company’s financial condition. Assets, liabilities and shareholder’s equity as of a specific date, such as the end of its financial year.
- Profit & loss accounts shows the turnover of whole year minus operating expenses and cost of sales.
Where you have provided advice to clients over financial standing of applicants after undertaking credit checks - do you consider yourself suitably qualified to provide financial advice of this nature?
I have never provided financial advice and it is out of my expertise. I am aware of a Dun & Bradstreet report which can access company’s financial viability. It provides a score on their financial strength and risk of failure.
Why do we need financial reporting?
- To understand any risk such as bad debts which may affect cashflow.
- To regulate and prevent fraud
- To ensure the financial health of the business to investors
What is cash flow and how is it prepared?
- Cash flow is the money in and money out of a project over the duration of the project
- In the projects I have been involved in it is prepared based on the consultant fees and their agreed draw downs. This is then combined with the cash flow forecast from the contractor submitting interim payments.
How did you predict cash flow on a project?
A S curve can be used on most projects.
What is the difference between management and financial accounts?
- Financial accounts are mainly for external parties and shows the performance of a business over a specific period and the state of affairs at the end of that period. Companies that are incorporated under the Companies Act 1989 are required by law to prepare and publish financial accounts.
- Management accounts are mainly for internal use and are used to help management record, plan and control the activities of a business and to assist in the decision making process. This can be prepared for any period.
What is a Dun and Bradstreet Report?
Dun & Bradstreet report is a report that shows the financial viability of a company. The report puts a score on the financial strength and the risk of failure.
What is VAT?
Value added tax. VAT is a tax that is charged on most goods and services that VAT-registered businesses provided in the UK. In the UK, the standard VAT rate is 20%.
What are the levels of VAT?
There are three rates of VAT, depending on the goods and services the business provides.
- Standard : 20%
- Cent reduced : 5%
- Cent zero : 0%
Installing energy saving materials can be at the reduced VAT rate.
What is Capital Expenditure?
CAPEX (Capital Expenditure) is expenditure that creates future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add value on an existing fixed asset.
What is OPEX?
Operating Expenditure (OPEX) is the expenditure for day-to-day running of the company, this includes the utilities, maintenance costs of assets.
