Chapters 1-5 Flashcards
What does the IFRS Foundation’s Conceptual Framework for Financial Reporting state that the objective of financial statements is?
To provide information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions relating to providing resources to the entity.
What is GAAP?
Generally Accepted Accounting Practice
What are limited liability companies required to do annually due to the Companies Act 2006?
Prepare and publish financial statements annually.
What did the IFRS Foundation form in 2021 to help with sustainability and what do they do?
International Sustainability Standards Board (ISSB)
They develop and issue IFRS Sustainability Disclosure Standards.
What are the two Fundamental qualitative characteristics as per the Conceptual Framework?
Relevance (Predictive and confirmatory value)
Faithful Representation (Complete, Neutral/unbiased, Free from error)
List the accounting Concepts and Conventions
Fair Presentation
Going concern
Accrual basis
Consistency of presentation
Materiality
Aggregation
Separate Entity
Historical cost
What does capital equal?
Opening capital + profits - drawings
What does the government and its agencies need to be able to do in relation to the business of a sole trader?
Establish levels of tax revenue and produce national statistics
What is the difference between input and output VAT?
Input VAT is the VAT included in the price for VAT taxable goods or services you buy to use in your business. (Can be reclaimed from HMRC by a VAT registered company). Output VAT is the VAT you must charge when you sell goods or services, provided your business is registered to do so.
In the VAT account, what do credits and debits represent?
A credit is money owed to HMRC (a current tax liability), whereas a debit is money owed from HMRC ( a current tax asset).
What do gross and net mean in terms of VAT
Gross includes VAT, Net excludes it
E.g., Gross = Net X 1.2
What are some of the benefits of computerised accounting systems?
Speed of processing large volumes of transactions
In-built controls to reduce input errors
Storage and sharing vast quantities of data in easily accessible formats
Freeing up accountants time to focus on higher level skills (analysis and advice).
What is standing data?
Reference data that does not regularly change e.g., customer addresses (for deliveries) and supplier details (for payments).
What are account codes?
Unique codes allowing a business to accurately record various transactions correctly.
What is processing and what are the two main types of processing?
Recording of transactions in a computerised system.
Can either be “real time” (each transaction updated at the point it take place) or “batch processing” (group of similar transactions are recorded in bulk at end of a period e.g., day or week).
