Matt - Accounting principles and procedures - Level 1 Flashcards
What are the 3 key financial statements?
- Income Statement
- Cash Flow Statement
- Balance Sheet
What is an income statement?
A statement covering all the income and expenses an organisation has accrued in the financial reporting period
What is a balance sheet?
This is a snapshot of an organisations resources such as assets and liabilities at a specific point in time.
What is a cash flow statement?
This is a statement which merges the balance sheet and income statement to show actual receipts and expenditure.
Can also show how a company plans to source potential cash flows.
What is EBITDA?
Earnings Before Interest Tax Depreciation and Amortisation
What is GAAP?
Generally Accepted Accounting Principles
What is the purpose of GAAP?
This is a form of regulation for how company accounts need to be prepared in the UK
What is the role of an auditor within accounting?
They will inspect a firms financial accounts to ensure their financial records are correct and in line with the law
Is GAAP mandatory?
Yes, in the U.K., companies must adopt GAAP or International Financial Reporting Standards (IFRS)
What is IFRS?
Another financial reporting standard, however most companies choose to adopt GAAP as it’s more flexible and straightforward
What is the principal legislation behind financial accounts being required by law?
Companies Act 2006
What does the Companies Act 2006 detail about how long accounts should be kept for?
- Private companies for 3 years
- PLCs for 6 years
Which are some companies you can go to for information for credit information on companies?
- Dun & Bradstreet
- Creditsafe
- Experian
Which section of the Red Book details valuations for financial reporting?
VPGA 1
