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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
What are the two types of assets
Tangiable or intangiable
26
Almost all assets are waht
tangiable - buildings ,cars , it, debtors, stock
27
What are intangible assets
items you can't put a value on - GOODWILL and BRAND
28
Are intangible assets current or non current
always non current
29
When would you put intangible assets in your accounts
When selling the business
30
What are current liabilities
OVERDRAFTS, BANK LOANS THEN LESS THAN 12 MONTHS AND CREDITORS
31
What are creditors
Bills you havent paid
32
What are non current liabilities
Things you owe for more than 12 months MORTGAGES AND LOANS OVER 12 MONTHS - NEVER PRO RATA
33
Income Statement What are the three profits:
Gross Profit Net Profit before Tax Net Profit after Tax
34
What is Gross Profit
Used for companies with stock. Shops etc
35
What is the Gross Profit formula
Income - cost of sales (Opening stock and purchased minus closing stock)
36
What is the cost of sales
Opening stock and purchased stock minus closing stock
37
Do brokers have gross profit
No - no stock
38
If you are a shop or someone who sells goods, how do you calculate your net profit before tax
Gross profit - expenses INCLUDING DEPRECIATION (salaries etc)
39
if you are a broker or insurer, without stock do you have gross profit
No. net profit before tax
40
What is net profit before tax
Income - expenses
41
What happens after net profit before tax
Corporation tax is added then its net profit after tax
42
What is the bottom line
Net profit after tax
43
What happens to net profit after tax
Usually given dividends to shareholders and then reinvested in the business as reserves
44
What are reserves in accounting
RETAINED PROFIT
45
Where do reserves on a balance sheet go under
An equity
46
Are reserves an asset
NO AN ASSET
47
What are the 4 different ways of describing money in
Turnover, income, revenue, sales
48
If net profit before tax is in brackets what does that mean
Its a loss - no profit
49
What three things go on a balance sheet
Assets, Liabilities, Equity
50
How do you work out total assets on balance sheet
Non - current assets (depreciated)+current assets
51
Is total assets NET assets
No - the total of what you own
52
What are liabiltiies
What you owe.
53
How do you work out total liabilities on balance sheet
Current liabilities + non current liabilties
54
How do you calculate your net assets on a balance sheet
Assets - liabiltiies
55
WHAT ARE NET ASSETS
ASSETS - LIABILTIES
56
What is equity
SHAREHOLDERS CAPITAL + (RETAINED PROFIT) RESERVES
57
What is a cash flow statement
On an actual basis. Money in and money out. Like our bank account.
58
Its year 2020. Money invoiced in 2020 but not yet paid goes into what
Income statement
59
Its year 2020. Money invoiced in 2020 but paid in 2021 goes where
Cash flow
60
Does deprecation of assets go into a cash flow
NEVER - ONLY INCOME STATEMENT
61
Where do expenses incurred in the previous year but paid this year go
A cash flow statement
62
Expenses incurred this year but not yet paid where does this go
Income statement
63
What does accrual mean
Invoiced but not yet paid
64
If cash flow is low it means what
not good.
65
Insurer accounts What is gross written premium
Money in -Premium before IPT
66
Insurer accounts What is outward reinsurance premium
Money in - What you pay reinsurers
67
Insurer accounts What is net written premium
Money in : Gross written premium - outward reinsurance
68
Insurer accounts How do you calculate unearned premium of a 12k premium incepted in October.
Money in -Unearned premium of £9k deducted from net written premium
69
Insurer accounts How to calculate net earned premium
Money in - Gross written premium minus reinsurance premium and unearned premium.
70
Insurer accounts What is net investment returns
Money in - Money you make/ hold. Can be in shares, interest etc
71
Insurer accounts Gross claims incurred
Money out - What you pay the policholder.
72
Insurer accounts What is reinsurer share
Money out
73
Insurer accounts What is gross claims incurred - reinsurer share
Claims incurred net of reinsurance
74
Insurer accounts What is acquisition costs
Broker commission. Deducted from claims incurred net of reinsurance
75
Insurer accounts What are other operating expenses
Money out - salaries, rent etc Deducted from claims incurred net of reinsurance
76
Insurer accounts How to calculate total expenses
Claims incurred net of reinsurance - operating expense's - acquisition costs
77
Where do reserves go
EQUITY
78
Insurer accounts balance sheet: What are the three headings
assets, liabilty , equity
79
Insurer accounts balance sheet: What is an intangible asset
The brand
80
Insurer accounts balance sheet: What are investments
ASSET: Shares, bonds
81
Insurer accounts balance sheet: What is reinsurers share of contract liabilities
ASSET: Money where reinsurer owes you money but claims haven't been settled
82
Insurer accounts balance sheet: What are deferred acquisition costs
ASSET: Commission already paid to the broker on the unearned premium
83
Insurer accounts balance sheet: What is provision on unearned premium
LIABILITY
84
Insurer accounts balance sheet: What is provision for losses and loss adjusment
A LIABILITY: Claim reserves
85
Insurer accounts balance sheet: What are reinsurance liabiltiie
LIABILITY: What you owe reinsurers but haven't paid them
86
Insurer accounts balance sheet: Where do debtors go
ASSET
87
Insurer accounts balance sheet: Where do creditors go
LIABILITY
88
Insurer accounts balance sheet: What is shareholder equity
SHAREHOLDER CAPITAL + RESERVES (RETAINED PROFIT)
89
What is Capital
Sum of the equity and long - term debt
90
What is regulatory capital
Sum of the equity and long term debt for insurance
91
What is the double entry principle
Reflects that the business both receives and gives in each transaction
92
In addition to bank loans and mortgages, how may business raise long- term finance
issuing shares retaining profits by reserves
93
What is a share capital on a balance sheet
Owned by the shareholders- the money a company raises by issuing shares of common or preferred stock.
94
What is working capital on a balance sheet
Money used to finance day - to day trading activities. its used to pay wages etc
95
How do you work out assets employed on a balance sheet
Calculated by adding non - current assets to working capital

M92 - andy (27 decks)

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