Accounting Principles & Procedures Flashcards
What are company accounts?
They are a summary of the business activity over the previous 12 months.
A set of accounts for a company will include:
1) Directors Report
2) Profit and Loss Account (aka income statement)
3) Balance Sheet
4) Notes to support the statement
What are the contents of a set of public limited company accounts?
1) Chairman Statement
2) Independent Auditors Report
3) Profit and Loss Accounts (aka income statement)
4) Balance Sheet
5) Cash Flow Statement
6) Directors Report
7) Corporate Governance Report
8) Remuneration (salary) Report
9) Other Statutory Information
When does a company need to be audited annually?
- Assets over £10.2 million
- Turnover over £5.1 million
- Over 50 staff
However – you may be qualify for an audit exemption if it has at least 2 of the following:
- an annual turnover of no more than £10.2 million
- assets worth no more than £5.1 million
- 50 or fewer employees on average
When carrying out money laundering checks for a public limited company – where would you look?
- London Stock Exchange
Why is it important to report at financial year end?
- Tax purposes
- Providing information to pubic, banks, shareholders and potential investors.
What is a Profit and Loss Account?
A financial statement that summaries the business revenues generated, and costs incurred during a specific period of time.
What is a Balance Sheet?
It is a statements of a business’s financial position.
What is an Asset?
An Asset can include:
- Cash
- Property
- Debtors (people or companies that owe you money)
- Other investment held
You can only know someone’s assets at a particular date – thus the end of the financial year.
What is a Liability?
A liability can include:
- Borrowing
- Overdrafts
- Loans
- Creditors (money that is owed)
What does a Balance Sheet Show Overall?
Assets – Liabilities = Net Reserves
If assets are less than liabilities = negative.
What is a Cash Flow Statement?
A financial statement that shows how the cash of business was generated and spent during the year, broke down into three parts:
- Operating Activities
- Investing Activities
- Financial Activities
What are the principles and procedures of accounting?
To give true and fair view of a company.
- Aware of Accruals basis of accounting – always recognises the transaction when it relates to it.
What is revenue / turnover?
Total Sales
What are management accounts?
They are prepared for internal use by company – they are NOT AUDITED.
What are the difference between management and statutory accounts?
Statutory Accounts = all accounts shown on company’s house / must follow accountancy regulations.
Management Accounts = internal accounts prepared by a company – they are NOT AUDITED.
