LVL 1 Accounting principles and Procedures Flashcards
What is the difference between management and company accounts ?
Management accounts are used internally by the managers of the business.
Financial accounts are company accounts required by law and audited by a Chartered Accountant.
What is a profit and loss account ?
A summary of a business’s income and expenditure transactions usually prepared on an annual basis.
P&L Accounts demonstrate how the revenue is transformed into the net income - how the actual income the business receives transfers into profit for the year.
What is a cashflow statement ?
Cash flow shows the actual receipts and expenditure and includes VAT.
Reviewing cash flow can identify potential shortfalls in cash balance i.e. where you may not have enough cash in the business to pay suppliers etc
Review cash flow helps ensure businesses can afford to pay suppliers and employees i.e. the cash coming in is enough to cover the cash going out.
What is a balance sheets ?
A balance sheet is a statement showing a business’s financial position at a point in time.
It shows a business’s assets and liabilities at a given date, usually at the end of a financial year.
What is a Generally Accepted Accounting Principles? - (GAAP)
Is the body of accounting standards which govern how companies financial statements record, measure, and disclose their financial transactions. It is published by the UK’s Financial Reporting Council (FRC).
What is the role of the auditor ?
By law, many commercial and non-profit organisations around the world must be independently audited. To meet this requirement, external auditors review financial statements to ensure they are a ‘true and fair’ account of past financial performance and current financial position.
What is the IAS and IFRS ?
International Accounting Standards (IAS) are older accounting standards issued by the International Accounting Standards Board (IASB), an independent international standard-setting body based in London. The IAS were replaced in 2001 by International Financial Reporting Standards (IFRS).
What guidance has been put into place by RICS ?
RICS Client Money Handling 2019 aims to keep client money safe, ensure client money is used only for appropriate purposes and to ensure RICS-regulated firms have appropriate controls and procedures in place to safeguard client money.
What is CDEL ?
The Department of Health (DH) sets a capital departmental expenditure limit (CDEL), which covers the capital spend of NHS trusts and is used by DH and treasury to monitor and manage capital expenditure within the sector.
What are the contents of the public limited company account ?
- Chairman’s Statement
- Independent Auditor’s Report
- Income Statement (P&L)
- Statement of financial position (balance sheet)
- Corporate governance report
- Remuneration report
- Other statutory information
What is the difference between a a public limited company (PLC) and a private limited company (LTD) ?
In many ways, a public limited company is similar to a private limited company. You’ll still be required to register with Companies House and your personal liability is limited. The main characteristic and advantage of a public limited company is that you can raise capital through external investors, in essence, offering shares in your company to the public. To set up as a PLC you need to have at least two shareholders and at least £50,000 worth of shares must be issued, although there’s no obligation for you to offer any further shares to the public
What is an audited account?
• When the financial results which a company compiles have been checked by an accountant qualified to conduct an audit, known as an auditor, they are known as audited accounts.
• If all is well, the auditor will state that the accounts give a “true and fair” picture of the company’s affairs.
What is meant by the terms Gross and Net?
• Gross refers to the total amount before anything is deducted. Many important accounting statistics use this method, such as gross earnings and gross profit.
• Net refers to the amount remaining after certain adjustments have been made for debts, deductions or expenses.
Why should you keep accounts?
• To keep track of money coming and money going out so they know they can pay their bills and suppliers.
• So they can monitor profit and loss and company performance.
• Use the information for future business planning
• So they can submit annual financial statements to Companies House
