Accounting Principles & Procedures Flashcards
Are you aware of the Generally Accepted Accounting Principles?
GAAP are standards for reporting business accounts set by the Financial Reporting Standards.
What are the two types of accounts?
Management accounts - internal accounts for internal use. May be required for a bank loan.
Financial accounts - for external stakeholders, submitted to companies house.
Can you explain the difference between a balance sheet and a profit and loss statement?
A balance sheet is a document which shows the assets and liabilities of a company at a given point in time.
A profit & loss statement shows the income and expenditure of a company over a set period of time (typically financial year)
How would you assess the financial stability of a company?
I would advise the client to undertake their own financial checks on a contractor or supplier.
However at a high level I could review information from Companies House, a credit report or undertake a ratio analysis.
