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M92 - andy > Chapter 6 Repeated > Flashcards

Chapter 6 Repeated Flashcards

1
Q

Are an income statement and profit loss account the same?

A

Yes

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2
Q

What basis is a cash flow done on

A

Actual basis

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3
Q

What basis is an income statement done on

A

Accrual basis

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4
Q

What is an accrual basis

A

Count for money in. Even if they haven’t paid it yet.
If invoiced in that period, you count it in even if you haven’t been paid it

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5
Q

If you have a bill outstanding, you still count it as money out even though you haven’t paid it… what’s that basis?

A

Accrual

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6
Q

A broker raises a new business premium with their insurer on 1st December with 60 day credit. Will they include this on their income statement

A

Yes. It’s accrual basis

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7
Q

An IT company sends a bill in December 2020 on 30 day term but the insurer doesn’t want to pay to January. When would the insurer put that money out on accrual basis

A

In December 2020

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8
Q

What is actual basis

A

Count money out when it actually goes out and when it comes in

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9
Q

What is a balance sheet

A

A snapshot. It shows what the company owns, what it owes, what it’s worth in a true and fair view

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10
Q

What are net assets

A

What you own minus what you owe

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11
Q

Are net assets total assets

A

No

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12
Q

What are reserves

A

Retained profit

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13
Q

Assets are what

A

What we own

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14
Q

Liabilities are what

A

What we owe

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15
Q

What are non current (fixed) assets

A

Something you keep for more than 12 months. Buildings, computers, cars, machinery etc

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16
Q

Do non current assets depreciated against tax?

A

Yes

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17
Q

What does depreciated against tax mean?

A

It reduces over its lifetime.

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18
Q

What is the deprecation of non current assets

A

asset value - residual value / years its going to be kept

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19
Q

A car is purchased for £20k, the residual value is £4k and you’ll keep the car for four years. What is the depreciation value

A

Value £20k - Residual £4k = £16k
divided by 4 years owned

= £4k

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20
Q

What is straight line depreciation

A

The same amount of every year

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21
Q

Brian buys a company car for £20k, he is going to keep it for 4 years and in 4 years time the residual value is £4k. What depreciation will be in year two only

A

£4,000 - will always be the same amount every year

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22
Q

Can non current assets be depreciated

A

Yes

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23
Q

What are current assets

A

Use in 12 months -
STOCK, CASH AND DEBTORS

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24
Q

What are debtors

A

People that owe you money

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25
Q

What are the two types of assets

A

Tangiable or intangiable

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26
Q

Almost all assets are waht

A

tangiable - buildings ,cars , it, debtors, stock

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27
Q

What are intangible assets

A

items you can’t put a value on - GOODWILL and BRAND

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28
Q

Are intangible assets current or non current

A

always non current

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29
Q

When would you put intangible assets in your accounts

A

When selling the business

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30
Q

What are current liabilities

A

OVERDRAFTS, BANK LOANS THEN LESS THAN 12 MONTHS AND CREDITORS

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31
Q

What are creditors

A

Bills you havent paid

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32
Q

What are non current liabilities

A

Things you owe for more than 12 months
MORTGAGES AND LOANS OVER 12 MONTHS - NEVER PRO RATA

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33
Q

Income Statement
What are the three profits:

A

Gross Profit
Net Profit before Tax
Net Profit after Tax

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34
Q

What is Gross Profit

A

Used for companies with stock. Shops etc

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35
Q

What is the Gross Profit formula

A

Income - cost of sales (Opening stock and purchased minus closing stock)

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36
Q

What is the cost of sales

A

Opening stock and purchased stock minus closing stock

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37
Q

Do brokers have gross profit

A

No - no stock

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38
Q

If you are a shop or someone who sells goods, how do you calculate your net profit before tax

A

Gross profit - expenses INCLUDING DEPRECIATION (salaries etc)

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39
Q

if you are a broker or insurer, without stock do you have gross profit

A

No. net profit before tax

40
Q

What is net profit before tax

A

Income - expenses

41
Q

What happens after net profit before tax

A

Corporation tax is added then its net profit after tax

42
Q

What is the bottom line

A

Net profit after tax

43
Q

What happens to net profit after tax

A

Usually given dividends to shareholders and then reinvested in the business as reserves

44
Q

What are reserves in accounting

A

RETAINED PROFIT

45
Q

Where do reserves on a balance sheet go under

A

An equity

46
Q

Are reserves an asset

A

NO AN ASSET

47
Q

What are the 4 different ways of describing money in

A

Turnover, income, revenue, sales

48
Q

If net profit before tax is in brackets what does that mean

A

Its a loss - no profit

49
Q

What three things go on a balance sheet

A

Assets, Liabilities, Equity

50
Q

How do you work out total assets on balance sheet

A

Non - current assets (depreciated)+current assets

51
Q

Is total assets NET assets

A

No - the total of what you own

52
Q

What are liabiltiies

A

What you owe.

53
Q

How do you work out total liabilities on balance sheet

A

Current liabilities + non current liabilties

54
Q

How do you calculate your net assets on a balance sheet

A

Assets - liabiltiies

55
Q

WHAT ARE NET ASSETS

A

ASSETS - LIABILTIES

56
Q

What is equity

A

SHAREHOLDERS CAPITAL + (RETAINED PROFIT) RESERVES

57
Q

What is a cash flow statement

A

On an actual basis. Money in and money out. Like our bank account.

58
Q

Its year 2020.
Money invoiced in 2020 but not yet paid goes into what

A

Income statement

59
Q

Its year 2020.
Money invoiced in 2020 but paid in 2021 goes where

A

Cash flow

60
Q

Does deprecation of assets go into a cash flow

A

NEVER - ONLY INCOME STATEMENT

61
Q

Where do expenses incurred in the previous year but paid this year go

A

A cash flow statement

62
Q

Expenses incurred this year but not yet paid where does this go

A

Income statement

63
Q

What does accrual mean

A

Invoiced but not yet paid

64
Q

If cash flow is low it means what

A

not good.

65
Q

Insurer accounts
What is gross written premium

A

Money in -Premium before IPT

66
Q

Insurer accounts
What is outward reinsurance premium

A

Money in - What you pay reinsurers

67
Q

Insurer accounts
What is net written premium

A

Money in : Gross written premium - outward reinsurance

68
Q

Insurer accounts
How do you calculate unearned premium of a 12k premium incepted in October.

A

Money in -Unearned premium of £9k deducted from net written premium

69
Q

Insurer accounts
How to calculate net earned premium

A

Money in - Gross written premium minus reinsurance premium and unearned premium.

70
Q

Insurer accounts
What is net investment returns

A

Money in - Money you make/ hold. Can be in shares, interest etc

71
Q

Insurer accounts
Gross claims incurred

A

Money out - What you pay the policholder.

72
Q

Insurer accounts
What is reinsurer share

A

Money out

73
Q

Insurer accounts
What is gross claims incurred - reinsurer share

A

Claims incurred net of reinsurance

74
Q

Insurer accounts
What is acquisition costs

A

Broker commission. Deducted from claims incurred net of reinsurance

75
Q

Insurer accounts
What are other operating expenses

A

Money out - salaries, rent etc Deducted from claims incurred net of reinsurance

76
Q

Insurer accounts
How to calculate total expenses

A

Claims incurred net of reinsurance - operating expense’s - acquisition costs

77
Q

Where do reserves go

A

EQUITY

78
Q

Insurer accounts balance sheet:
What are the three headings

A

assets, liabilty , equity

79
Q

Insurer accounts balance sheet:
What is an intangible asset

A

The brand

80
Q

Insurer accounts balance sheet:
What are investments

A

ASSET: Shares, bonds

81
Q

Insurer accounts balance sheet:
What is reinsurers share of contract liabilities

A

ASSET: Money where reinsurer owes you money but claims haven’t been settled

82
Q

Insurer accounts balance sheet:
What are deferred acquisition costs

A

ASSET: Commission already paid to the broker on the unearned premium

83
Q

Insurer accounts balance sheet:
What is provision on unearned premium

A

LIABILITY

84
Q

Insurer accounts balance sheet:
What is provision for losses and loss adjusment

A

A LIABILITY: Claim reserves

85
Q

Insurer accounts balance sheet:
What are reinsurance liabiltiie

A

LIABILITY: What you owe reinsurers but haven’t paid them

86
Q

Insurer accounts balance sheet:
Where do debtors go

A

ASSET

87
Q

Insurer accounts balance sheet:
Where do creditors go

A

LIABILITY

88
Q

Insurer accounts balance sheet:
What is shareholder equity

A

SHAREHOLDER CAPITAL + RESERVES (RETAINED PROFIT)

89
Q

What is Capital

A

Sum of the equity and long - term debt

90
Q

What is regulatory capital

A

Sum of the equity and long term debt for insurance

91
Q

What is the double entry principle

A

Reflects that the business both receives and gives in each transaction

92
Q

In addition to bank loans and mortgages, how may business raise long- term finance

A

issuing shares
retaining profits by reserves

93
Q

What is a share capital on a balance sheet

A

Owned by the shareholders- the money a company raises by issuing shares of common or preferred stock.

94
Q

What is working capital on a balance sheet

A

Money used to finance day - to day trading activities. its used to pay wages etc

95
Q

How do you work out assets employed on a balance sheet

A

Calculated by adding non - current assets to working capital

M92 - andy (27 decks)

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