Accounting, Principles & Procedures Level 1 Flashcards

1
Q

What is the difference between a balance sheet and a profit & loss account?

A

A balance sheet is a financial snapshot at one given time showing the financial position of the company. It is based on liabilities and owners equity at that time

Profit & loss accounts shows the profit & loss over a determined period. It is based on revenue and expenses over a set period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When would you use a balance sheet and a profit & loss account?

A

I would use a balance sheet to determine a company’s financial position.

I would use a P&L to determine a company’s financial performance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

How do you prepare a cashflow?

A

By determining the starting balance, then considering cashflow from operations, investing and financing, and then determining the ending balance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

If actual was at variance to forecast what does this say?

A

It means that actual inflows or outflows were higher or lower than expected based on the forecast.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What action would you take if actual was at variance to forecast?

A

I would identify the reason for the variance, and whether this was a temporary variance or permanent variance by monitoring the cash flow closely. I would update the cashflow accordingly.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How would assess the financial standing of a contractor? What other sources of information?

A

Audited accounts, tax returns, customer base, senior management background and employee resources, litigation, claims, disputes in progress, insurances in place

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What do you understand by the acronym GAAP?

A

GAAP stands for the Generally Accepted Accounting Principles, which is a key accounting framework. It is a collection of commonly followed accounting rules and standards for financial reporting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What do you understand by the term ratio analysis?

A

It is an analysis of the financial statements of a company. They can be used to determine the financial standing, through analysing profitability, liquidity, solvency.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Can you give me some typical ratio analysis examples?

A

Liquidity ratios, profitability ratios, gearing ratios

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are statutory accounts?

A

They are a set of financial reports that companies prepare at the end of the financial year. They are required by law and are for external stakeholders.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are management accounts?

A

Accounts prepared by a company for internal management or use. They may be prepared for a lender to evaluate how the business will repay funding.

They will not be audited externally.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are the key difference between management and statutory accounts?

A

Management accounts are presented internally

Statutory accounts are for external stakeholders and are required by law.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

In the UK, where are statutory accounts for limited companies required to be filed?

A

Companies House

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What current challenges is Covid and/or brexit and/or the current conflict in Russia & Ukraine bringing to Accounting P&P?

A
  1. Extended customer due diligence in case they have connections to Russia
  2. VAT implications as a result of changing regulations following Brexit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly