Accounting Principles & Procedures Flashcards
What should be included in company accounts?
- Chairman’s statement.
- Independent auditor’s statement.
- Income (P&L) statement.
- Statement of Financial Position (Income Statement).
- Corporate Governance Report
- Remuneration Report
What is a P&L Statement?
P&L shows if a company is profitable - over a period of time (annual basis)
Shows income and expenditure by summarising revenues, expenses & net profit/loss
What is gross revenue?
Revenue before any deductions
What is net revenue?
Revenue after any deductions
Name some examples of deductions
- Interest on loans.
- Salaries
What is a balance sheet?
Balance Sheet shows what a company owns and owes (financial position) - snapshot on a specific date.
Summarises assets, liabilities and equity.
Name some examples of assets
- Cash in the bank
- Property
- Debtors
- Other investments held
Name some examples of liabilities
- Borrowings
- Overdrafts
- Loans
- Creditors
What is the difference between a P&L and Income Statement?
P&L shows if a company is profitable - over a period of time. Summarises revenues, expenses & net profit/loss
Balance Sheet shows what a company owns and owes - snapchat on a specific date. Summarises assets, liabilities and equity.
What are management accounts?
Unaudited accounts for internal use only and to make operational and strategic decisions.
Usually produced on a monthly basis.
What are audited accounts?
Accounts prepared by a chartered accountant - for reporting to external stakeholders.
What is a cashflow statement?
Show actual receipts and expenditure (inc VAT).
It helps determine the company’s liquidity, financial health, and ability to generate cash to fund operations, pay debts, and invest in growth.
What are consolidated sets of accounts?
Individual subsidiary accounts for a company within a single set of accounts.
What is a profits test?
Usually a prospective tenant would provide three consecutive years of accounts. The net profit would have to be at least three times the annual rent, service charge and rates (inc VAT) to pass.
What is a D&B score?
Produced by Dunn & Bradstreet.
Assesses the financial stability and creditworthiness of a business.
N - 5A = financial strength
1 - 4 = risk factor.
What is IFRS16?
A lease accountancy standard which means that the full cost of a lease has to be included in a company’s balance sheet.
Rent would be a liability.
Exemption - lease under 12 months.
Became effective on January 2019
What is UK GAAP?
UK Generally Acceptable Accountancy Principles.
Outlines principles & standards that need to be followed.
Principle examples - regularity, utmost good faith, consistency.
What is a gearing ratio?
DEBT/EQUITY
ULR aims for 30-40%.
How do you work out Current Ratio
Current Assets / Current Liabilities
How do you work out Profit Margin
Profit / Revenue
