APC Mandatory - Accounting Flashcards
What are the Generaly accepted accounting principles GAAP?
They are the standards that encompass the details, complexities and legalities of corporate accounting.
(Generally used by public bodies and larger cooperations and will aim to focus on FORC-M)
What does GAAP include
FORCM
Focuses on consistency via below
Full disclosure
Objectivity
Revenue
Costs
Matching
What are management accounts?
Detailed INTERNAL reports focused on a businesses financial health and operational efficiency
When should management accounts be prepared?
Unlike annual reports, they can be prepared monthly or quarterly.
What are annual accounts for private ltd companies?
Summary of organisation’s financial activities over a 12 month period. Prepared for companies House and hmrc and include a balance sheet, p&l and a cash flow statement
What is a balance sheet
Statement of financial position
Provides a snapshot insight into a companies assets and liabilities at a given date, usually at the end of a financial year.
On a balance sheet what are assets and liabilities?
Assets: cash, land, property, vechiles or stock.
Liabilities: obligation for debt to be repaid such as credit card, loans, mortgages
What is a P&L statement
Shows income/expenditure for the company over the financial year
What is a cashflow statement
Receipts/expenditure during an accounting period
What is the main difference between a cash flow statement and a balance sheet?
Cash Flow Statement: Shows the cash inflows and outflows over a period, highlighting liquidity and cash management.
Balance Sheet: Provides a snapshot of a company’s assets, liabilities, and equity at a specific point in time, showing financial position
When is a statutory financial audit required?
Companies act 2006
Auditors verify accountants work
Small and micro businesses are exempt if:
Anuall turnover less than 10.2m
Balance sheet less than 5.1m
Number of employees less than 50
When is a company exempt from financial auditing under the Companies act 2006
Annual turnover: less than £10.2mill
Balance Sheet: less than £5.1mill
Number of employees: less than 50
What is the IFRS
International financial reporting standards promotes [TAE] transparency, accountability and efficiency.
FRS 102 principle accounting standards in uk financial reporting regime
FRS 15 is used for public sector context
FRS 16 changes in 2019 Inc. Leases more than 12 months must be recorded on the balance sheet
What is gross profit?
REVENUE - COST IF GOODS SOLD
Company profit after deduction of costs for making/selling products associated with providing its services
What is net profit?
TOTAL REVENUE-TOTAL EXPENSES
net earnings after deducting total expenses from revenue
What is accounting?
Process of keeping financial accounts
What is meant by the terms Gross and Net?
In salary terms, Gross is the total salary and Net is the salary minus tax and other deductions
Why do Chartered surveyors need to understand and be able to interpretation company accounts?
A) assessing competition
B) setting up new firm
C) assist with business operations
D) rental analysis for percentage turnover top ups etc.
What does EBIDTA mean?
Earning s before interest, taxes, depreciation, and amortisation
What is VAT
Value added tax
Standard rate 20%
Uk GAAP
GAAP in the UK. Valuations for inclusion in financial statements are prepared in accordance with UK GAAP
What are valuations for financial statements under UK GAAP?
Under UK GAAP (Generally Accepted Accounting Principles), property that is owner-occupied must be valued at its existing use value (EUV) or depreciated replacement cost (DRC).
What is the difference between GAAP and IFRS
GAAP = Rule based
IFRS = Principle based
What accounts are most useful to you when doing the profits method?
Three years previous to the valuation date as long as they are a full set of accounts.
What are asset valuations
LA’s are obliged to re-value property assets on either a 3 or 5 yearly rolling programme. Under CIPFA (Chartered Institute of Public Finance and Accountancy) rules, public sector organisations are also required to maintain a register of property assets and to represent these within their accounts.
What do companies need to provide to every year in accordance with the Companies Act 2006?
Cashflow, balance sheet and P&L statement
What are the recent IFRS changes?
IFRS S1 - companies must disclose all sustainability related risks
IFRS S2 - sets out requirements for disclosing climate related matters
Explain the difference between cash basis and accrual basis accounting.
Accrual accounting records income and expenses when they are earned or incurred, not when cash is received or paid.
Accounts payable vs. accounts receivable
Accounts payable are amounts a company owes to suppliers, while accounts receivable are amounts owed to the company by customers.
Trial balance
It’s a list of all ledger accounts and their balances at a particular time, used to check the accuracy of bookkeeping.
Working capital
It’s the difference between current assets and current liabilities, indicating the company’s short-term financial health
