Accounting Principles & Procedures Flashcards
What is VAT?
Value-added Tax
What is cooperation tax?
Paid by UK limited companies. Based on the annual profits that the company makes
What is a financial audit?
Examination of a company’s financial records
What is turnover?
Income that a company receives
What are business overheads?
Indirect / fixed expenses a business requires to operate.
May include rent, staff salaries, utility bills and insurance
Why does a business keep company accounts?
Tax Purposes
Demonstrates financial standing
Ensure casflow and profitability is managed correctly
What is the difference between management and financial accounts?
Financial accounts descrivbe the performance of the business and required to be filed on Companies House
Management accounts are used by business owners and management to summarise a business’ current financial health
What is an escrow account?
Legal holding bank account where monies can’t be released until predetermined conditions are satified
What is a project bank account?
Account that allows payments to be made direct to Contractor
What are the 3 types of accounting ratios?
Liquidity ratio - organisations ability to turn assets into cash to pay debts
Profitability ratio - business’ ability to generate earnings relative to revenue (takes into account operating costs)
Gearing ratio - measures proportion of companys borrowed funds to its equity
What is financial leverage?
Use of borrowed money to finance the purchase of assets with the expectation the income from new asset will exceed the borrowing
What are capital allowances?
Practice of allowing taxpayers to get tax relief on tangible capital expenditure
What are the core financial statements companies must produce?
Profit and loss statement
Balance Sheet
Cashflow Statement
What is UK GAAP?
Generally Accepted Accounting Practice
Regulated UK body which establishes how financial accounts should be prepared
Why is it important for surveyors to understand company accounts?
Access financial health of competing surveying practices
Access financial health of tenderers
Aid in preparing financial accounts for own firm
What is a profit and loss statement?
Summary of a company’s revenues, expenses, and profits/losses over a given period of time
What is a balance sheet?
Details a company’s assets or liabilities at a specific point in time
What is a cashflow statement?
Shows how cash entered and exited a company during an accounting period
What is the difference between a balance sheet and a profit and loss statement?
Balance sheet is a snapshot of financial position at one given time.
Profit and loss statement shows profit and loss over a period of time
What is insolvency?
Inability to pay off debts or creditors
