Accounting Principles & Procedures Flashcards
What is a profit and loss statement?
A document that shows a company’s revenue and expenditure over a set period of time, usually 12 months.
What is a balance sheet?
A document that provides a “snapshot” of a company’s current financial position at a point in time. It shows a company’s financial health and records their assets, liabilities and shareholder equity.
What are fixed and current assets?
Current Assets is a short-term asset that a company expects to use up and convert into cash. Company inventory for example
A Fixed Asset is a longer-term asset that a company won’t sell for over 12 months. For example, an office.
What is the difference between debtors and creditors?
Creditor – lends funds to a business.
Debtor – borrowed money from another and owes money.
What was G&Ts turnover and profit in the last financial year?
£292 million. Profit approx. 20%
What are Dunn & Bradstreet financial checks?
They a credit reports on a business that track payment history, outstanding balances and transactions. D&B use these to create a set of credit scores.
Why is managing cash flow important to a business?
It helps a business understand what needs to be paid and when, so they can notify their bank or funder of necessary draw downs. It also helps a business plan for the future to determine whether they can cope with future work.
What are management accounts?
An internal financial report used to summarise a business’ financial health in order to make business decisions.
What is the difference between management accounts and financial accounts?
Financial accounts describe a business’ performance and must be filed on Companies House. These are for external stakeholders.
Management accounts are used internally to make business decisions.
What is a project bank account?
A ring-fenced bank account that allows payments to be made simultaneously and directly to contractors and the supply chain.
What are the different types of accounting ratio?
Gearing Ratio – measures the proportion of borrowed funds to equity. A measure of financial risk
Liquidity Ratio – measures the ability for a company to turn assets into cash
Profitability Ratio – measures the ability for a company to generate earnings relative to its revenue and expenditure.
What is a cashflow forecast?
A document that show how much money a business is expected to receive and pay out over a set period.
What is a cashflow forecast used for?
- Understand the impact of future plans and possible outcomes.
- Plan for upcoming gaps in cash.
- Allows clients to understand their financial commitment to construction projects.
- Can be used to estimate draw downs required.
- Can be an early sign of a contractor’s financial health.
What is insolvency?
Inability to pay off debts or creditors.
What are signs of contractor insolvency?
- Slow down of works.
- Inflated payment requests.
- Complaints from subcontractors.
- Lack of materials on site.
