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FBT > Chapter 13 > Flashcards

Chapter 13 Flashcards

1
Q

What is the accounting function?

A

Accounting is the systematic recording, reporting and analysis of financial transactions within a business

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2
Q

What is financial accounting?

A

Concerned with recording and processing transactions as they occur.
This role contributes to the preparation of the annual financial statements in accordance with relevant accounting standards and legistlation

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3
Q

What is treasury management?

A

May include the management of working capital, cash, financing and foreign currency and tax

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4
Q

What is management accounting?

A

Preparing and presenting accounting info to assist management with policies. planning and controlling activities

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5
Q

What are the key areas of management accounting?

A

Budgeting, standard costing, variances and KPIs

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6
Q

What is the importance of the accounting function?

A

Historically it was to report performance, now we influence business strategy and enhance performance, add value to business and advice on cutting costs

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7
Q

What is the role of the financial accounting function?

A
  • Statutory accounts
  • It is the classification and recording of monetary transactions; and
  • the presentation and interpretation of the results of those transactions in order to assess performance over a peroid
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8
Q

What does the SPL show?

A

Performance over a period of time

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9
Q

What does the SFP show?

A

position at this point in time

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10
Q

What is the statement of cash flow?

A

Shows the generation of cash and cash equivalents and the uses if cash and cash equivalents in the period.

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11
Q

Why is the statement of cash flow important?

A

as the final profit figures include assumptions and estimates e.g., valuation of inventories, depn policies and doubtful debts

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12
Q

What is the financial accounting integrated reporting?

A

A concise communication about how an organisations strategy, governance, performance and prospects in the context of its external environment, lead ot the creation of value in the short, medium and longterm

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13
Q

What are the key features of management accounting?

A
  • Internally focussed
  • wider in scope
  • concerned with identifying, presenting and intercepting info which is used for formulating strategy, planning and control, decision making and optimising the use of resources.
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14
Q

What does management accounting include?

A
  • setting budgets and budgetary control
  • analysing company’s performance
  • investment appraisal
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15
Q

Why do we have cost schedules in man accounting?

A
  • value inventory
  • record costs/calculate profits
  • price products
  • make decisions
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16
Q

What is the standard cost unit?

A

the planned unit cost of a product or service

17
Q

What are the different budgetary systems?

A
  • top down vs bottom up
  • incremental
  • zero- based
  • rolling
  • activity based
  • feedforward control
18
Q

What is the purpose of budgets?

A

PRIME

  • Planning
  • Responsibility
  • Integration
  • Motivation
  • Evaluation
19
Q

Why are variance reports important?

A

as they are a tool that can be used as a starting point to understand how the business has performed.
where problems have arisen?
They pinpoint the problems

20
Q

What are the functions of a treasury?

A

Deal with investigating surplus funds and raising finance

21
Q

What must a treasury fund ensure?

A
  • surplus cash is invested profitably

- excessive risks are not taken

22
Q

What is the treasury responsible for?

A
  • cash management
  • overseeing bank relationships
  • including bank borrowing
  • liquidity management
  • foreign exchange
  • risk
  • corporate finance
23
Q

What are the steps to raising finance?

A

1) Issue shares (equity finance)
2) Loan money (debt finance)
3) Simplest and cheapest - use retained earnings to invest
4) Grants

24
Q

What is more riskier debt or equity?

A

Debt

25
Q

Does equity finance get repaid?

A

No

26
Q

Investing in debt guarantees what?

A

returns

27
Q

Does equity investors have guarentees?

A

no

28
Q

Is debt cheaper than equity?

A

Yes

29
Q

Is equity easier to source than debt?

A

no

30
Q

What happens if the debt to equity ratio is low?

A

There is scope for the company to raise finance by means of debt

31
Q

Is tax avoidance legal?

A

No

32
Q

Is Tax evasion legal?

A

Yes

33
Q

What is tax avoidance?

A

tax planning to arrange affairs within the scope of the law, to minimise the tax liability

34
Q

What is tax evasion?

A

The illegal manipulation of the tax system to avoid paying tax

FBT (24 decks)

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