CHAPTER 1 - KEEPING ACCOUNTS

Question 1

Why do we keep accounts?

Answer 1

Legal requirement

Record assets / liabilities

Assess amounts owed and owing

Prepare bugets

Assess performance

Assess tax / VAT liabilities

Question 2

What do accounts record?

Answer 2

What the business owns, owes, its expenses and income

Question 3

Accounts assist in…..

Answer 3

Forecasting

Planning

Monitoring

Controlling

Question 4

Who needs accounts?

Answer 4

Owners - decision making

Investors - will they get a return

Lenders - can they repay

Suppliers - will they get paid

Customers - will they get the goods

Employees - job security

Government Agencies - VAT

Public - environmental issues

Question 5

Name the 3 year end financial statements

Answer 5

1. Profit & Loss (Financial Performance)
2. Balance Sheet (Financial Position)
   
   • what’s owned and owed
3. Cash Flow Statement
   
   • where the money came from and went

Question 6

What does the credit manager use accounts for?

Answer 6

Shows levels of sales and profit

Whether they’re growing

Show if company has available cash or current assets to cover debt

Shows what debts they have to pay and when