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AAT L4 FSLC > Framework And Ethics > Flashcards

Framework And Ethics Flashcards

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1
Q

The main benefit of accounting standards

A

Credibility, comparability and discipline

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2
Q

Credibility?

A

Financial statements would lose credibility if companies carrying out similar transactions disclosed markedly different results simply because they could select accounting policies.
Therefore, accounting standards are necessary to ensure financial reports give a true and fair view of the company.

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3
Q

Comparability?

A

By having financial statements prepared on a consistent basis, inter-company comparisons can be made.

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4
Q

Companies act 2006 states that what items must be filed with the registrar of companies.(also referred to as published accounts)

A 
Statement of profit and loss 
Statement of financial position 
A directors report 
An auditors report 
Group accounts (If the company has subsidiaries)
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5
Q

Why would investors be interested in the financial statements

A

Investors need to make decisions that involve buying, holding or selling shares or debt investments(loan stocks debentures), also they need information about the returns the might expect

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6
Q

Why would a lender/other creditor be interested in the financial statements

A

The would need information to make decisions about providing or settling loans and other forms of credit. They need information about the returns they can expect from lending (interest payments and the eventual repayment of the principal amount of the loan)

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7
Q

What do lenders and creditors need information about

A

Assets
Liabilities
Stewardship

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8
Q

Who are the secondary users who will also be interested in a companies financial statements.

A

Management
Regulators
Employees
Individuals

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9
Q

What are the fundamental qualitative characteristics

A

Relevance
Faithful representation
Materiality

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10
Q

What are the enhancing qualitative characteristics

A

Comparability
Varifiability
Timeliness
Understandability

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11
Q

Assets turnover total assets

A

Total assets

Revenue ÷ total assets

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12
Q

Assets turnover net assets

A

Revenue ÷ total assets- current liabilities

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13
Q

Capital employed

A

Capital and reserves (equity)+ non current liabilities

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14
Q

Current ratio

A

Current assets ÷ current liabilities

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15
Q

Expense/revenue percentage

A

Operating expenses/ cost of sale÷ revenue

X100

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16
Q

Gearing

A

Non current liabilities ÷total equity +non current liabilities
X100

17
Q

Gross profit percentage

A

Gross profit ÷revenue

X100

18
Q

What is highly geared

A

A company having a high proportion of debt compared with equity

19
Q

Interested cover

A

Profit from operations/ operating profit ÷ finance costs

20
Q

Inventory holding period

A

Investors ÷ cost of sales

X365

21
Q

Inventory turnover

A

Cost of sales ÷inventory

22
Q

What is liquidity

A

The ability to pay its debts as they fall due

23
Q

Operating profit percentage

A

Profit from operations ÷revenue

X100

24
Q

Quick ratio

A

Current assets- inventory ÷ current liabilities

25
Q

Return on capital employed

A

Operating profit ÷total equity + non current liabilities

X100

26
Q

Return on equity

A

Profit after tax ÷ total equity x100

27
Q

Trade payables payment period

A

Trade payables ÷ cost of sales

X365

28
Q

Trade receivables collection period

A

Trade receivables ÷ revenue

X365

29
Q

Working capital cycle

A

Inventory days + receivable days - payable days

Or specified expense ÷revenue
X100

30
Q

What is a subsidiary

A

An entity that is controlled by another entity ( the parent company)

31
Q

What is non controlling interest

A

The remaining amount not owed but the parent company

32
Q

What would is an adjusting event

A

Events after the reporting period which provide evidence of conditions existing at the end of the reporting period

33
Q

What is a Constructive obligation

A

An obligation which occurs where an entity indicates that it will accept certain responsibilities and, as a result, the entity has created a valid expectation that it will discharge those responsibilities.

34
Q

Contingent assets

A

A possible assets that arises from past events and whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the entitys control

35
Q

Amortisation

A

The systematic allocation of the depreciable amount of an intangible asset over its useful life.

36
Q

Carrying amount

A

The amount at which an asset is recognised after deducting any accumulated depreciation (Amortisation) and accumulated impairment losses.

AAT L4 FSLC (1 decks)

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