Accounting Flashcards
What are the fundamental precepts of accounting?
To record an organisations transactions so its dealings can be planned and reported.
What are bodies sole?
Consists of sole traders and partnerships which have no legal requirement to produce accounts.
What are bodies corporate?
Covers all other forms of organisation and are recognised by law as being a legal entity separate from their owners.
Who sets UK reporting standards?
Financial Reporting Council
Who sets International Financial Reporting Standards (IFRS)?
The International Accounting Standards Board (IASB) is an independent body.
How must all UK listed companies prepare their consolidated accounts?
Using UK adopted IFRS.
What must an auditor report to shareholders?
Whether the reports and accounts have been prepared properly.
Why issue a qualified report?
Where there is limitation in scope or disagreement.
How can balance sheet accounting be expressed?
Shareholder funds + long term liabilities + current liabilities = non current assets + current assets.
Where are tangible non current assets charged?
To the income statement as depreciation each year.
What does depreciation do to the net book value?
It decreases the net book value of the asset in the balance sheet.
How is straight line depreciation calculated?
(Original cost - expected residual value)/ expected useful life.
How does the reducing balance method calculate depreciation?
As a constant percentage of the last period book value.
How are inventories valued?
First in first out, last in first out or a weighted average.
What is the most common inventory valuation method in the UK?
First in First out. Last in first out not permitted under IFRS and Generally Accepted Principles in the UK (UK GAAP)
What is goodwill?
The value by which the value of a business exceeds the value of its assets less liabilities. Normally occurs when another company is acquired.
How is goodwill treated under UK GAAP?
Capitalised as an asset on the balance sheet and written down through an annual change to the P&L account, where it cannot be maintained indefinitely.
Under International Accounting Standards (IAS) how is goodwill treated?
Not amortised but it subject to an impairment test each year.
What are the three parts of reserves?
Share premium, revaluation reserves and other reserves.
IAS 19 is the standard for what?
Defined benefit pension costs and it brings the schemes surplus or deficit directly into the balance sheet of the sponsoring firm.
What are post balance sheet events?
Fed
What is a fundamental principle of IAS 32?
That a financial instrument should be classified as either financial liability or equity instrument according to substance of contract not its legal form.
What does IAS 32 require a company to do?
Describe its financial risk management objectives and policies including hedging policies.
What is IFS 9?
Include requirements for financial instrument recognition and measurement, impairment derecognition and generally hedge accounting.
