Accounting Procedures Flashcards
What is a balance sheet?
A balance sheet is a financial statement for a copoany at a given time.
Shows a company’s assets, liabilities and shareholders’ equity at a specific point in time
usually the end of a financial year
What is a balance sheet also known as?
Otherwise known statement of financial position
What is a profit and loss (income) statement?
- statement showing revenues and expenses during a particular period.
- used to assess a company’s ability to generate profit
This is done by increasing revenue, reducing costs or both.
what is the difference between what a profit and loss statement and a balance sheet show?
- The balance sheet reports a company’s assets, liabilities and shareholders’ equity during a specific period.
- The P&L statement shows a company’s revenues and expenses.
What is a cash flow and how is it prepared?
*Shows how much cash or cash equivalent is generated and used during a given time period.
Cash flow refers to the net balance of cash moving into and out of a business at a specific point in time.
If more money is coming into the business than is going out of it, cash flow is said to be ‘positive’. If more money is going out, this is negative cash flow.
How can you predict cash flow on a project?
An S curve can be used on most projects.
What is the difference between management accounts and financial/company accounts?
Management accounts:
- are mainly for internal use
- used to internally to record, plan and control performance
Financial / Company accounts:
- prepared annually for external parties - HMRC and Companies House
- describe the performance of a business over a specific period and the state of affairs at the end of that period.
What is contained within company’s account?
CRISISC
Chairman Statement Remuneration report Income statement Statement of financial position Independent Auditors report Statutory information Corporate governance report
As a business what information would you be required to submit to Companies House?
- Profit & loss statements
- Balance Statements
- Cash flow statements
What is the difference between operational and capital expenditure?
Operational expenditure = money spent on the running costs of a business e.g. wages, rent on premises etc.
Capital expenditure = money spent on acquiring and maintaining fixed assets e.g. land, buildings etc.
What is the principal legislation governing accounting reporting in the UK?
The Companies Act 2006
main piece of legislation which governs company law in the UK
Under which accounting standard are financial statements/reports prepared?
UK Generally Accepted Accounting Principles (UK GAAP)
or
International Financial Reporting Standards (IFRS)
what is the difference between GAAP and IFRS?
GAAP is rule based.
IFRS is principal based e.g. stating how transactions should be reported in financial statements. Also international recognition with FRS.
Are you aware of FRS 102 or New UK GAAP?
Yes - within financial / company accounts ,
company’s must now revalue their tangible fixed assets
i.e. investments properties are to be valued on the basis of the market value rather than use value.
Are you aware of IFRS 16?
Yes - The International Financial Reporting Standard 16 is
a new lease accounting standard
The full cost of leases will have to be accounted for on the balance sheet.
applied to all UK public companies to comply from 1st January 2019.
