Accounting principles & Procedures (L1) Flashcards
What is ROCE and how is it calculated?
Efficiency of cash utilisation.
= net operating profit / capital employed
What is a balance sheet?
Statement of financial position at a moment in time.
(Current and non current)
ASSETS - cash, property, debtors
LIABILITIES - borrowings, creditors, loans
Liabilities+ equity equals what?
Assets
How are your company accounts structured?
We are a private Ltd company.
We have a BS, P&L and CF statement.
Each region has consolidated accounts and are audited
When does a company need to be audited?
> £10.2m turnover
£5.1m assets
50 employees
What is required in a limited company’s accounts?
BS
P&L
Directors report
Notes
What is required in a public company’s accounts?
BS
P&L
Chairman’s statement
Independent auditors report
Remuneration report
Corporate governance structure
What is a profit and loss account?
(Income statement)
Annual income and expenditure
Shows profitability over time
Revenue - COGS = GPM
- Operating expenses = NPM
What is a cashflow?
Shows the cash balance over time
Actual receipt of expenditure (incl VAT)
Cash is from operating, financing, investing activities.
What does the companies act 2006 state companies do?
To file accounts to companies house annually.
Records must be held for 6 years.
What is insolvency
Unable to pay debt
What is auditing?
Certify accounts and a company’s financial position.
What is IFRS 16?
A new lease accounting standard.
2019 onwards
Must recognise a lease in the accounts of lease is >12 months
What accounting standards does your company use?
IFRS
IFRS 15 (revenue recognition)
IAS 2 (inventory)
What financial reporting frameworks are there in the UK?
IFRS and GAAP
What is IFRS?
International Financial Reporting Standard
Published by IASB
Principles based.
Public companies must use this
What is GAAP (UK)
Generally accepted accounting principles.
Rules based.
What is gross profit margin?
Shows profitability.
Gross profit / GDV
Why is budgeting important?
Sets clear financial goals
What are company accounts?
Statutory accounts
Informs 3rd parties / tax
Record of financial activity
Legal requirement to co. House (BS, P&L, directors report, notes)
What are management accounts
Informs managers to set org goals.
Internal use.
For decision making.
What is a financial ratio?
Tracks performance. For meaningful insight into a firms operations.
What is a liquidity ratio?
Ability to pay obligations
Current ratio = c.assets / c.liabilities
What is a debt ratio?
Total Liabilities/total assets
What is a profitability ratio
Ability to generate income relative to the financial statements eg
GPM (GP/GDV)
What types of companies are there?
PLC
Limited Liability partnership
LTD private
Sole practitioner
Stonebond’s 2022 financial performance ?
Operating margin
ROCE
Operating profit
Turnover
8.2%op margin
25% ROCE
£8.1m operating profit
£98.7 T/O
How many homes did Stonebond deliver in 2022
264
