Accounting Principles & Procedures - Lvl 1 Flashcards
What are Financial Statements?
Financial statements are written records that convey the business activities and the financial performance of an entity.
Can you provide examples of Key Financial Statements?
1) Profit & Loss account
2) Balance Sheet
3) Cash Flow Statement
What are the two types of company accounts?
Financial accounts
Management accounts
What is the difference between Management and Financial accounts?
Financial accounts are required by law e.g under the Companies Act 2006 and are prepared annually.
Management accounts are for internal use and are prepared more regularly.
What is the difference between a Profit & Loss account and a Balance Sheet?
1) A Profit & Loss account shows the incomes and expenditures of a company and the resulting profit or loss.
2) The Balance Sheet shows what a company owns (assets) and what it owes (liabilities) at a given point in time.
What is a Cash Flow Statement?
It is the summary of the actual or anticipated ingoing and outgoing of cash in a firm over the accounting period.
It is broken down into operating, investing and financing activities.
It measures the short term ability of a firm to pay off its bills.
What is the difference between Debtors and Creditors?
Creditors - Your firm owes another firm money - e.g. If you owe a sub-consultant fees then they are a creditor.
Debtors - A firm who owes your firm money - e.g. a client who owes you fees is a debtor.
When does the UK tax year run?
from 6th April to 5th April of the following year
How long are you required to keep company accounts for?
3 years for private companies
6 years for PLCs
What is a credit report?
a detailed record of an individual’s or business’s credit history. Includes a credit rating (A - E), information on the person/business, repayment history, outstanding debts and financial public records like bankruptcies or CCJs.
Where can you view a companies accounts?
Companies House
What are the size categories for companies?
Micro Enterprise
Small Business
Medium Business
Large Business
How are size categories determined?
Number of employees
Turnover
Balance Sheet Total
In the UK and EU, companies are assessed against all three criteria, and if they meet any two out of the three, they can qualify for a certain size category.
When must accounts be filed with Companies House?
A newly formed company has 21 months from the date of incorporation to file its first accounts.
For established companies, accounts must be filed within 9 months of the company’s financial year-end (also known as the accounting reference date).
What are the consequences of not filing accounts with Companies House?
Companies that file their accounts late face penalties, which increase the longer the delay:
- 1 day to 1 month late: £150
- 1 to 3 months late: £375
- 3 to 6 months late: £750
- More than 6 months late: £1,500
Repeated late filings over several years can result in additional consequences, such as potential legal action against company directors as failing to file accounts is a criminal offence.
