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BLP > Accounts > Flashcards

Accounts Flashcards

1
Q

2 meanings of accounts

A

Day to day record of business transactions
And
Accounting year end summary

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2
Q

What does the profit and loss account tell us

A

How profitable the business is through calculation income - expenditure = profit

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3
Q

How is the profit and loss account set out

A

All income grouped together followed by all the expenses

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4
Q

What do brackets show

A

A minus figure or figure to be deducted

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5
Q

What are the columns on a profit and loss account

A

On trial balance it is CR and DR

But otherwise the left is workings and right is main figures

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6
Q

Which account gives the best indicator if business can pay its debts

A

Balance sheet

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7
Q

What does trading account show

A

Gross profit by income from sales- cost of sale (cost of buying stock)

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8
Q

Where is the gross profit from trading account transferred to

A

Profit and loss account

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9
Q

Which businesses have trading accounts

A

Businesses which buy and sell goods having trading accounts ( preliminary accounts)
In addition to profit and loss account
Businesses providing professional services don’t need trading account

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10
Q

What does balance sheet show

A

Assets and liabilities on last day of accounting period
Shows how much business is worth on day of preparation

Shows assets- liabilities = net worth of business

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11
Q

What must balance sheet be headed with

A

The date of preparation

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12
Q

What are the two parts of the balance sheet

A

1 assets - liabilities owed to third party (employment of capital)
2 amount owed to propitiator as capital ( capital employed)

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13
Q

How is balance sheet set out

A 
Vertically
Fixed assets
Current assets
Current liabilities 
Long term liabilities 
Value to proprietor

Assets in increasing order of liquidity so buildings at top and cash at bottom

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14
Q

What are the three figures shown in the capital employed section of the balance sheet

A

Opening figure- money owner paid into business when they started it

Net profit figure- money business made since it started trading

Drawings figure - money business owner has taken out of business since it began trading

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15
Q

What are net current assets and what does it show

A

Current assets - current liabilities

Shows business liquidity

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16
Q

What are net assets

What does it show

A

Fixed and current assets- Short and long term liability

This is the amount owing to business owner as capital at the end of the year

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17
Q

What does drawing accounts show

A

Money withdrawn by owners across the year

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18
Q

What does capital employed section show

A

The value of the business to the owner

Balance on capital account (money put in by owner), net profit from Profit and loss account (Money made across year)
Deduct balance in drawings account

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19
Q

Adjustments for final accounts

A 
Outstanding expenses 
Prepayments 
Work in progress 
Closing stock 
Bad and doubtful stock
Depreciation and revaluation 
Disposing of assets
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20
Q

Outstanding expenses

A

Expense in profit and loss account

Current liability in balance sheet under accruals

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21
Q

Prepayments

A

Current asset in balance sheet called prepayment

Reduce value of expenses paid in profit and loss account

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22
Q

Work in progress

A

Asset on balance sheet

Income called profit costs on profit and loss

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23
Q

Closing stock

A

Asset on balance sheet

24
Q

Bad and doubtful debts

A

Debtors are current asset on balance sheet
Bad debts - expenses on profit and loss and deduct from debtors asset figure on balance sheet
Doubtful debts- expense on profit and loss and subtract from debtors asset figure on balance sheet

25
Q

Depreciation

A

Expense in profit and loss account

Depreciation is determined as a percentage of the value of the asset

26
Q

Showing disposal of asset in accounts

A

If sold for cash total assets don’t change but balance sheet does
Fixed assets figure is reduced and cash figure increases

If sold for more than amount recorded in accounts as its value (book value) this is shown in profit and loss account as profit

If sells for less than book value it is recorded in profit and loss account as reduction in net profit

27
Q

How is the introduction of money to a business recorded in the accounts

A

Unincorporated business - capital account for each contributor

Companies - share capital account ( for all S, not one each) premium in share premium account

28
Q

What is the capital employed section of a balance sheet called for companies

A

Capital and reserves
Financed by
Or
Equity

If there are different types of shares these are show separately on balance sheet

29
Q

How is buy back of shares shown in accounts

A

Issued share capital is reduced by the nominal amount

30
Q

When an S sells shares to third party how is this shown in accounts

A

It is not shown in final accounts

31
Q

How are dividends show in accounts

A

Not included in profit and loss account but once paid cash figure is reduced

32
Q

What is the profit and loss reserve made of

A

Balance of net profits after tax and dividends
These are retained profits
These don’t form part of capital of company so can be distributed as dividends

33
Q

How is tax shown in accounts

A

Unincorporated - not shown because it is is the P or ST that pay tax

Company- CT is shown in company account
Profit and loss account shows profits before and after tax
Tax due is current liability on balance sheet
When tax is paid it disappears from current liabilities and cash decreases in current assets section

34
Q

How is Ds salary shown in accounts

A

Expense in profit and loss account

35
Q

What do reserves show

A

What company owes to S

Would be paid to S if company wound up

36
Q

Can reserves be distributed

A

Capital reserves cannot be distributed but revenue reserves can be

37
Q

What kind of reserve is a profit and loss reserve

A

A revenue reserve

38
Q

What does profit and loss reserve consist of

A

Company profits after tax and after payment of dividends

39
Q

If parent company in group produces balance sheet and profit and loss account for group do individual companies still need to produce their own

A

Yes

40
Q

How is net profit shown if a P leaves or joins part way through an accounting period

A

It is apportioned between the period before and the period after the change
2 appropriation accounts are prepared
1st shows allocation of profits earned before the change and 2nd shows allocation of profits after change

41
Q

What are Ps owed

A

Net profits
If only 1 then credited directly to capital account
If several Ps they have separate current accounts for each P to which the appropriation of net profit (incl salary and interest) is added and from which drawings are deducted

42
Q

How are Ps accounts shown on balance sheet

A

Capital and current account balances of each P are shown separately on Balance sheet in capital employed section

43
Q

What do separate Ps records show

A

How much capital P contributed, how much profit is owed to each P and how much they withdrew that year

44
Q

What does Ps capital account show

A

Ps have one each

It shows the amount contributed by each P

45
Q

How are Ps salary and interest on their contributions logged in the accounts

A

Everything P receives is logged as profit even if they consider it salary or interest

Appropriation account shows how net protons is divided between Ps ( for LLP and general partnership)

46
Q

What is a medium sized company

A

Balance sheet total no more than £18m
Turnover not more than £36m
No more than 250 employees

47
Q

CA 2006 accounting requirements

A

Companies must keep adequate accounting records and prepare accounts for every financial year
Must also have accounts audited

48
Q

Which companies are exempt from having the accounts audited

A

Small and dormant companies are exempt but S holding 10% or more of the nominal issued share capital may require an audit

49
Q

What is the employment of capital section called on a company balance sheet

A

Assets

50
Q

What are current and long term liability called on company balance sheet

A

Amounts falling due within 1 year

Amounts falling due within more than 1 year

51
Q

What must D ensure before approving accounts

A

That they provide a true and fair view of assets and liabilities

52
Q

Where do companies file their annual accounts

A

With registrar of companies

53
Q

what are the sections on a company’s profit and loss account

A

Income
Expenses
Profit generated by trading/ operating activity from other items such as finance costs

Items are grouped into categories such as administration expenses

CT liability shown at end of profit and loss account

54
Q

What are the choices of format (company accounts)

A

Must prepare either companies act individual accounts or international standard individual accounts complying with IFRS or FRS102

Both need profit and loss acc and balance sheet
IFRS and FRS 102 need additional reports and accounts

55
Q

Who must receive a copy of the annual accounts and reports each financial year

A

S
Debenture holders
Anyone entitled to receive notice of GMs

BLP (22 decks)

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