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Question 1

Solvency.

Answer 1

Ability to pay back liabilities

Question 2

Trustee

Answer 2

A trustee is any person or organization that holds the legal title of an asset or group of assets for another person, called the grantor. A trustee is granted this legal title through a trust in which the they hold title to the assets held in trust for the benefit of others.

Basically your Stand In

Question 3

Insolvency

Answer 3

Bankruptcy Liquidation

Question 4

Incorporation.

Answer 4

Literal: Inclusion of something as part of a whole.
Incorporation is the term used to describe the formation and registration of a limited company. When this process is complete, a certificate of incorporation will be issued. The legal status of a limited company is that it is a separate entity from the owners of that business.

Question 5

Mortgage

Answer 5

a legal agreement by which a bank, building society, etc. lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.

Question 6

Floating Charge

Answer 6

It is the mortgage over the constantly fluctuating assets of a company providing security to the lender.

Question 7

Policy

Answer 7

A course or principle of action adopted or proposed by an organization or individual.
It is basically a set of guidelines or rules to follow (which can be preset) when completing a task.

Question 8

Materiality

Answer 8

(Materiality refers to identifying the issues that matter most to a company’s business and stakeholders and determining how important they are.)

(Materiality in accounting refers to the relative size of an amount, and the impact it makes on the financial statements. In the accounting process, accountants deem relatively large sums of money to be material)

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An item is regarded as material if its omission or misstatement is likely to change the perception or understanding of the users of that information.

On the other hand, an error that is too trivial to affect anyone’s understanding of the accounts is considered immaterial.

Materiality is simply a measure of how important that information is to users.

Question 9

Mutually Exclusive (Something that cannot coexist)

Answer 9

Mutually exclusive is a statistical term describing two or more events that cannot happen simultaneously. It is commonly used to describe a situation where the occurrence of one outcome supersedes the other. For example, war and peace cannot coexist at the same time. This makes them mutually exclusive.

Question 10

Threshold quality for information/financial statements?

Answer 10

Basic necessity of an information required to consider other qualities. A cut off point.

Question 11

Equity

Answer 11

Equity, typically referred to as shareholders’ equity (or owners’ equity for privately held companies), represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debt was paid off in the case of liquidation. In the case of acquisition, it is the value of company sales minus any liabilities owed by the company not transferred with the sale.

Question 12

Credit

Answer 12

credits refer to outgoing money

Question 13

Debit

Answer 13

debits refer to incoming money

Question 14

Realize

Answer 14

to convert into actual money.

realized assets. b. : to bring or get by sale, investment, or effort : gain. realized a large profit.

Question 15

Overdraft

Answer 15

a deficit in a bank account caused by drawing more money than the account holds

Question 16

Why is there mistrust between shareholders and directors and auditors?

Answer 16

Due to unreliable and fradulaent financial reporting (often for monetary gain) there are cases where directors often cook the books like Worldcom or Enron.

Question 17

Cadbury report 1992.

Answer 17

The system by which companies are directed and controlled in the interests of shareholder and in relation to those stakeholders beyond the company.

Question 18

Corporate governance divided into two?

Answer 18

Purpose and objectives
Purpose: Monitor parties within a company who control the resources owned by investors.

Objectives: Contribute to improved corporate performance and accountability in creating long term shareholder value.

read page 32 for learning major objectives.

Question 19

Basic requirements directors of a company have to follow to be accountable to the stakeholders of a business?

Answer 19

A general duty of care to act in good faith for the benefit of the company.

A duty to avoid conflict of interests. Between personal interest and those of the company and its stakeholders,
AND TO MAKE A DISCLOSURE IF SUCH A CONFLICT ARISES.

Question 20

Directors responsibilities by law?

Answer 20

To maintain and establish adequate system of internal controls which prevent and detects fraud and error

To maintain adequate accounting records that provide a basis for the preparation of annual financial statements.

Prepare annual financial statements that show a true and fair view of financial position and performance of the company, which should comply with relevant laws, regulations and IFRS standards.

responsibility to approve the annual financial statements prior to their publication, and to file it in accordance with local law and regulations

Question 21

Need for corporate governance?
Basic elements of a sound corporate governance?

Answer 21

Effective management
Effective systems of internal control
oversight of management by non-executive directors
fair appraisal of director performance
fair remunerations to directors
fair financial reporting
constructive relationship with shareholders.

Question 22

What is the UK corporate governance code (2006) ?

Answer 22

All listed companies in the UK have to submit a report stating how they have complied with the provisions of the code and a statement of compliance with the code. If they have not reasons for so and alternative action they have taken.

Question 23

5 areas the code provides guidance on?

Answer 23

*Board leadership and company purpose

*division of responsibilities of the board of directors

*composition, succession and evaluation of the board of directors

*audit risk and internal control

*remuneration of the board of directors.

Question 24

Us Sarbanes Oxley act enforces? Incompliance may lead to criminal charges.

Answer 24

Sound system of internal control
Clear documentation of financial process, risks and controls
evidence that management have evaluated the adequacy and designs of system and controls
evidence that the auditor has evaluated the adequacy and design of system controls

Question 25

The need for US Sarbanes Oxley act?

Answer 25

Increase confidence and accountability of both shareholder and stakeholders in the company’s financial statements.

Question 26

What is the imprest system?

Answer 26

The Imprest system is an accounting system that’s used to track how your business is spending cash. In most cases, Imprest systems are used to account for petty cash (a small amount of money used for expenditure on smaller items, i.e. office supplies, catered lunch, cards for customers, etc.).

Question 27

Accrued Interest

Answer 27

What Is Accrued Interest? In accounting, accrued interest refers to the amount of interest that has been incurred, as of a specific date, on a loan or other financial obligation but has not yet been paid out by debtee.

It is an asset as it has not yet been paid to the business.

Question 28

market forces?

Answer 28

There are four major factors that cause both long-term trends and short-term fluctuations. These factors are government, international transactions, speculation and expectation, and supply and demand.

Question 29

What is equilibrium?

Answer 29

Latin word ‘acquis’ and libra meaning equal balance.
Means “stability or “state of rest”

Question 30

What is variable consideration?

Answer 30

Variable consideration is consideration that is not fixed.
When a seller makes a sale, it is know at the time of recording the sales revenue whether the customer would opt for the discount (Settlement discount).

Question 32

What is Accrual Method?

Answer 32

Accrual accounting is an accounting method that records revenues and expenses before payments are received or issued. In other words, it records revenue when a sales transaction occurs. It records expenses when a transaction for the purchase of goods or services occurs.

Question 33

What is ISO quants

Answer 33

An isoquant in economics is a curve that, when plotted on a graph, shows all the combinations of two factors that produce a given output. Often used in manufacturing, with capital and labor as the two factors, isoquants can show the optimal combination of inputs that will produce the maximum output at minimum cost.