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Business Law and Practice > Business Accounts > Flashcards

Business Accounts Flashcards

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1
Q

What financial statements are prepared for each accounting period?

A
  • profit and loss account
  • balance sheet
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2
Q

What is bookkeeping?

A

Process of recording money transactions

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3
Q

What is a nominal ledger?

A

transactions of a similar type grouped together

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4
Q

What is trial balance?

A

debit and credit balances at end of accounting period should be the same

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5
Q

What are the classifications of ledgers/accounts?

A
  • Asset
  • Liability
  • Capital
  • Income
  • Expense
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6
Q

What are fixed assets?

A

owned by business to enable profit (held for over a year)

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7
Q

What are current assets?

A

Cash or items owned which can be quickly turned into cash (within 1 year)

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8
Q

What is the profit and loss account?

A

records income throughout accounting period minus epxenses incurred

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9
Q

What is the balance sheet?

A

records position of business in respect of asset, liability and capital accounts

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10
Q

What will a balance sheet tell you?

A
  • net asset value (top half)
  • capital invested (bottom half)
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11
Q

What are the types of year end adjustments?

A

Depreciation
Accruals
Prepayments
Bad debts
Doubtful debts

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12
Q

What are the methods of depreciation?

A
  • straight line
  • reducing balance
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13
Q

What is an accrual adjustment?

A

When expense incurred that should be charged against profit but cant in current year

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14
Q

What is a prepayment adjusment?

A

Expense paid in current year but should be charged for next year

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15
Q

What is a bad debt?

A

Business knows with certainty they wont receive it

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16
Q

What are the types of doubtful debts?

A

Specific doubtful debts
General doubtful debts

17
Q

How are profits divided in a partnership?

A
  1. notional interest on capital
  2. notional salary
  3. share of profits according to agreed profit ratio
18
Q

Why do companies prepare accounts?

A

Obliged by statute

19
Q

When do private companies need to file accounts at companies house?

A

Within 9 months of end of relevant accounting reference period

20
Q

When do public companies need to file accounts at companies house?

A

Within 6 months of end of relevant accounting reference period

21
Q

What are the main differences for financial statements of companies?

A
  • capital accounts include share capital, reserves and retained earnings
  • taxed
  • dividends paid as appropriation of profits
22
Q

What is called up share capital?

A

Aggregate sum that has been called up

23
Q

What are reserves?

A

capital of the company in excess of the called-up value of the issued share capital.

24
Q

What categories can reserves be split into?

A

Capital reserves
Revenue reserves

25
Q

What are examples of capital reserves?

A

share premium account
revaluation reserves
capital redemption reserves

26
Q

What are examples of revenue reserves?

A

retained earnings

27
Q

What are retained earnings?

A

Profits carried forward from previous year

28
Q

Which reserves can be paid to shareholders by dividends?

A

Revenue reserves

29
Q

What is share premium account?

A

Difference between nominal value fo shares and amoutn paid by SHs

30
Q

Which financial statement will dividend payments show on?

A

Statement of changes in equity

31
Q

What are the types of dividends that can be paid on ordinary shares?

A
  • final dividend
  • interim dividend
32
Q

How are final dividends decided?

A
  • recommended by directors in directors report
  • declared by shareholders in ordinary resolution
33
Q

Who is a declared dividend enforceable as a debt by?

A

Shareholders

34
Q

Can interim dividends be paid without ordinary resolution?

A

If articles allow directors to decide

35
Q

Are interim dividends a debt enforceable by shareholders?

A

No

Business Law and Practice (10 decks)

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