Chapter 8: Accounting Analysis Flashcards
What is a Balance Sheet?
What is the equation for balance?
Provides a snapshot of a companies financial position. Its 3 sections are Assets, equity and liabilities. These must balance.
Assets = equity + liabilities
What Are Three Major Statements?
- Balance Sheet (Statement of financial position)
- The Income Statement
- A Cash Flow Statement
What is the Income Statement?
What does it show?
Summarises income and revenue that is earned and the expenses that are incurred by the company.
What is a Cash Flow Statement?
What are the 3 activities?.
The statement identifies how much cash the company has generated over the accounting period and how much cash has been spent.
The three activities are operating, investing and financing activities.
What are Additional Statements to Help Stakeholders Compare to Previous Years?
The local state…..
Statement of comprehensive income and a statement of changes in equity and notes.
What is an Audit?
What does these do?
An independant assesment of the companies account that have been prepared by the directors.
Release an auditors report to the member / shareholders confirming this is a fair and accurate view of the company.
What are the 5 Elements that Appear in a Set of Financial Statements?
There are 5.
- Assets
- Liabilities
- Equity
- Revenue
- Expenses
What is the Combination of Accounting Regulations?
This is similar the FRM people?
Generally accepted accounting principles (GAAP)
What is the IASB?
What do they do?
The International Accounting Standards Board.
Produce a set of high quality, transparent comparable information for financial statements.
What is the ISSB?
What do they do? ESG?
International Sustainability Standards Board.
Produce standards for high quality documentation surrounding ESG matters.
What is the IFRS?
What do they do? Its a mouthful but simple…
International FInancial Reporting Standards
A non profit, public interest organisation established to develop high quality, understandable, enforceable and globally accepted accounting and sustainability disclosure standards.
What was the IASB Formally Called?
The International Accounting Standards.
What is a Group Account and When is it Needed?
A consolidated financial statement from a parent company and all the subsidary companies that it controls. Appearing as a single statement.
What are the 2 Issues that can Arise When Amalgamating Group Accounts?
Car show?
- **Goodwill **(Cost of investment in the subsidary, over the net assets)
- Non Controlling Assets (% of a subsidary that is owned by other investors e.g. if the firm only owns 70% the non controlling interest would be 30%)
What is Depreciation?
What asset type does this apply to?
Is applied to tangiable non-current assets (plant / machinery), whereby the reflection of its use over time is called depreciation on the financial statement.
What is Depreciation of Intangiable Non-Current Assets Called?
Amortisation.
What are Depreciation and Amortisation Recorded as on Financial Statements?
Expenses.
What is the Equation for Straight Line Depreciation?
SLD = (Cost-disposal value) / Useful economic life in Years
What is the Formula for Equity?
What is it the sum of (Accounting)?
Equity = Share Capital + Reserves
What are the 4 Main Types of Equity?
- Share Capital (Nominal value of share capital in issue)
- **Capital Reserves **(From revaluation reserves and share premium account)
- Revenue Reserves (Retained Profits)
- Non-Controlling Interests (When a parent company controls a subsidary but does not own all of the share capital)