General Flashcards
1
Q
- What is VAT?
A
Value Added Tax
2
Q
- What is corporation tax?
A
- A tax paid by businesses in the UK
- Calculated on their annual profits in a similar way to income tax for people
3
Q
- What is an audit?
A
- Process used to check a person or companies compliance with policy, procedures or regulation.
- Audits are performed to ascertain the validity and reliability of information, also, to provide an assessment of systems internal control.
4
Q
- What is turnover?
A
- Income or revenue which a company receives from its normal business activities
- Usually from the sale of goods or services to customers
5
Q
- What are management accounts?
A
This are a form of internal reporting that shows how a business had performed in a given period. They can also be shown to banks for loans to evaluate how the business might repay funds. Management accounts will not be audited externally.
6
Q
- What is the difference between management accounts and financial accounts?
A
- Management accounts are presented internally.
- Financial accounting is meant for external stakeholders.
7
Q
- Why does a business keep company accounts?
A
- Tax purposes as this is required by law
- Demonstrates the company`s financial standing (supports load applications)
- To ensure cashflow and profitability demonstrating a company is being correctly managed
8
Q
- What is an ESCROW account?
A
- A separate account owned by a third party held on behalf of two other parties.
- It can be used as a project bank account
9
Q
- What is a project bank account?
A
- This is a bank account that would be set up for a particular project.
- The client pays sums of money into the account to allow the contractor to take and make payment faster than the normal process allows.
- In theory it speeds up the flow of cash down the supply chain
10
Q
- What are overheads?
A
Indirect costs or fixed expenses of operating a business:
* Rent or leasing costs
* Utility bills
* Staff salaries
* Insurance
11
Q
- Explain the principal of tax depreciation?
A
Is the depreciation that can be listed as an expense on a tax return for a given tax period. It is used to reduce the amount of taxable income reported by a business.
12
Q
- Name 3 types of accounting ratios?
A
- Liquidity ratio – The organisations ability to turn assets into cash in order to pay debts
- Profitability ratio – Use to assess a businesses ability to generate earnings relative to its revenue, operating costs balance sheet assets or shareholder’s equity over time, using data from a specific point in time.
- Gearing ratio – Measures the proportion of a companies borrowed funds to its equity. The ratio indicates the financial risk to which a business is subjected as excessive debt can lead to financial difficulties.
13
Q
- What is financial leverage?
A
- Is an investment strategy of using borrowed money
- Specifically the use of various financial instruments to borrow capital to increase the potential return of an investment
14
Q
- What are Capital Allowances?
A
The practice of allowing taxpayers to get tax relief on their tangible capital expenditure by allowing it to be ducted against their annual taxable income.
15
Q
- What are the key financial statement that companies produce?
A
- Profit and loss account – Shows the outcome of business activities during an accounting period
- Balance sheet – Statement of the assets, liabilities, and capital of a business Snapshot
- Cash flow forecast – Shows money coming in and going out of a business, the forecast elements can be important if applying for finance as it will allow someone to understand when you plan to have money coming in.
