Accounting Principles & Procedures

Question 1

What is the purpose of a balance sheet?

Answer 1

A balance sheet (statement of financial position) is a statement of the business’s financial position showing its assets and liabilities at a given date, usually at the end of a financial year.

This includes assets such as cash, property, debtors, and investments held, as well as liabilities like borrowings, overdrafts, loans, and creditors.

Question 2

What is included in a set of public limited company accounts?

Answer 2

A set of public limited company accounts includes: Chairman’s statement, Independent auditor’s report, Income statement (profit and loss account), Statement of financial position (balance sheet), Corporate governance report, Remuneration report, Other statutory information.

Management accounts are prepared for internal use and are not audited, while audited accounts are prepared by a Chartered or Certified Accountant.

Question 3

What is a profit and loss account?

Answer 3

A profit and loss account (income statement) is a summary of the business’s income and expenditure transactions, prepared usually on an annual basis.

IFRS 16 is the lease accounting standard that impacts how occupiers regard their property liabilities, requiring the full cost of leases to be accounted for on the balance sheet.