Chapter 6 Flashcards
What is book keeping
The actual record making process of accounting
Who would be interested in a company’s financial information
Stakeholders
Andy: What do quoted limited companies have to do on the companies act 2006 in respect of accounting
Provide an annual accounts return which must be audited by an independent auditor. Audited accounts or a true selection of a company state to the outside world
What 4 things are included in the account of quoted companies
Narrative report from the chairman and CEO executive
A strategic report
Financial accounts for the period
Other legal requirements such as a details of a directors remuneration
The companies act 2006 include regulations on accounting such as The: 
- Requirement to keep adequate accounting records
- Directors duty to prepare account for a company
- Directors duty to prepare accounts for a group of companies and the consistency of financial reporting within a group
- Requirement to prepare accounts that show a true and fair view
Account include the company’s financial statements which comprise of what
The income statement
The balance sheet
Cash flow statements
What is an income statement
It shows the profit and loss
What is a balance sheet
A statement of financial position of the business at a point in time
What is a cash flow statement
Show the sources and uses of cash and a useful indicator of a company is liquidity
What is the substance over form concept
The financial statement to show the economic substance of transactions rather than the legal form
Andy: the annual accounts will include what financial statement showing:
Income statement
Balance sheet
Cash flow statements
Narrative reports of a chief executive and directors
The companies plan for the future
Other legal requirements such as a directors remuneration
(Optional) Chairmans report
Andy: Who uses a company’s financial information
Stakeholders. Quoted Companies have shares available to the public
Andy: What is an income statement
Shows the results of trading and is done on a accrual basis- it counts the money in if you’ve done the work and the money is an actually in
Andy: What basis or cash flow statement done
An actual basis
Andy: What are balance sheets
Balance sheet or a snapshot of the account at a particular moment in time to show what the company owns what it owes and what it is worth
Andy: what should income statement, balance Street and cash flow statement show
They must show a true and fair view
Which stakeholders will Have an interest in organisations financial information
Owners Directors and managers Employees The public Tax authorities Financial analysts Creditors and lenders Competitors Brokers Customers PRA and FCA
What is profitability
It is a companies ability to make a profit. Is there is a positive amount of money left over we’re all costs and expenses or subtracted from the organisations income than organisation has made a profit
Who want to know if a company has been profitable
Managers
Employees
Existing and potential shareholders
In profitability if your mouth left over when all costs and expenses are subtracted from organisations income is zero what does that mean
They have broken even
What is the cash position (liquidity)
The amount of cash which a business has, or has access to, is known as its liquidity
 what is Working capital
The difference between current assets and current liabilities
What is solvency
Solvency is a measure of the excess of an organisations assets compared with liabilities. If a company liabilities exceed its assets it’s so said to be technically insolvent And will be required to cease trading
andy: What is income
All amounts earned.
Sales, revenue, turnover
