Accounting Principles & Procedures

Question 1

What are the three types of financial statement you may come across relating to a company

Answer 1

Balance sheet

Profit and Loss statement

Cashflow Statement

Question 2

What are the key elements of a business plan?

Answer 2

Analysis of of the opportunities and risks of the business.

SWOT Analysis - Strengths, Weaknesses, Opportunities, and Threats to help with decision-making.

market strategy

financial plan

operations plan

Question 3

What is an asset / liability? Could you give me an example of each?

Answer 3

An asset is something a business owns that has value, e.g., property, equipment, or cash.

A liability is something a business owes, e.g., loans, rent, or unpaid invoices.

Question 4

What is the difference between financial and management accounts?

Answer 4

Financial accounts show a company’s overall performance and position for external use (e.g., profit & loss, balance sheet).

Management accounts are internal reports used to help make business decisions (e.g., budgets, forecasts).

Question 5

What do you understand by the term: Generally Accepted Accounting Principles (GAAP)?

Answer 5

GAAP refers to the standard rules and guidelines used for financial reporting to ensure consistency and accuracy.

Question 6

How do companies know which reporting framework to comply by?

Answer 6

Companies follow the reporting framework based on their location, size, and type

Question 7

Which reporting framework do public limited companies have to comply with?

Answer 7

Public limited companies (PLCs) must comply with the International Financial Reporting Standards (IFRS).

Question 8

How would you assess the financial strength of an entity for a valuation?

Answer 8

Check company accounts - recommend that these are reviewed by a qualified accountant

Profits test

Aquire Dun and Bradstreet Report

Question 9

What is GAAP

Answer 9

Generally
Accepted
Accounting Principles

Body of accounting standards published by the UK’s Financial reporting council

How company accounts must be prepared

Question 10

What is the Limitation Act 1980?

Answer 10

Outlines the time limit within which a creditor can chase a debtor for outstanding debts

Limits the amount of time within which a party must bring a claim