Accounting Principles & Procedures

Question 1

What does a set of public limited company accounts include?

Answer 1

• 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

Question 2

What does a balance sheet (statement of financial position) show?

Answer 2

Statement of the business’s financial position showing its assets and liabilities at a given date, usually at the end of a financial year
• Assets: cash, property, debtors and other investments
• Liabilities: borrowings, overdrafts, loans and creditors

Question 3

What does a profit and loss account (income statement) show?

Answer 3

Summary of the business’s income and expenditure transactions, prepared usually on an annual basis
Recorded on an accruals basis i.e. revenues are reported when they’re earned

Question 4

What does the cash flow statement show?

Answer 4

Shows actual receipts and expenditure. It is not included in the annual accounts but is prepared for management purposes

Question 5

What are the three primary types of financial accounts?

Answer 5

• Balance Sheet
• Profit and Loss Account
• Cash flow statement

Question 6

What are management accounts?

Answer 6

Prepared for internal use by the business and are not audited

Question 7

Who are audited accounts prepared by?

Answer 7

Chartered or Certified Accountant