Accounting Principals & Procedures Flashcards
(35 cards)
What is a Balance Sheet?
Shows companies assets, liabilities & shareholders equity
Show how much is owned and owed
What is a Profit & Loss Account?
Financial Statement
Compares income and expenditure with adjustment for any liabilities
Used to identify the profit or loss a company has made over a specific period
What is a Cash Flow Forecast?
Reviews and analyses predicted incomings & outgoings for set time period usually 1 years
What is Cash Flow Statement?
Shows in the incomings and out goings of a business for a specific period of time
What are a Balance Sheet, Profit & Loss Account & Cash Flow used for?
Cash Flow Statement - Identifying potential shortfalls in cash balance
Balance Sheet - Assessing financial position/health of a company. Can be compared to previous ones to identify any trends
Profit & Loss Account - Calculating the companies profit margin
Cash Flow Forecast - Business resource planning
What Key Financial Statements all companies must have?
Profit & Loss Account
Balance Sheet
Cash Flow
What business company accounts are businesses required to undertake?
In accordance with the companies Act Ltd. companies must provide Year Accounts which include a balance sheet, profit & loss account in accordance with the legal format
What is an Asset?
Resource tangible & intangible that is owned or controlled with the expectation it will provide future benefit
What is a Liability?
What is owed to another party
What is Capital?
Financial Resources/Assets used to fund operations, make investments or grow the business
How are Assets, Liabilities & Capital Monitored?
Assets - Recored on the left of the balance sheet - monitored by assts tracking
Liabilities - Recorded on the right of the balance sheet - liability tracking
Capital - Recorded in the Capital Account - KPI’s
How is Cash Handled in your Firm?
By the accounts department.
eg. at the end of the sale we balance up and the money is paid into the relevant accounts.
Rendells office Account - for payment of professional fees
Market Account for livestock
Client Account for monie held on clients behalf
What is the limit to the amount of cash a firm can accept?
No blanket legal limit in UK
However
Businesses accepting 10,000 or more must register as a high valuer dealer with HMRC
How is a client account recognised?
It is expilcity named
How is security to company accounts managed maintained?
Limited to Access by personnel in accounts dept & equity partners.
Regular peroiduc changes of passwords
Reconcilliation of accounts
How do you manage invoices/payments/debts in the firm?
All copies of invoices are sent to the accounts the dept, with an invoice number recorded and these are logged on sage.
We also keep an a record of these on a spreadsheet relating to our office.
Payments - are put through to accounts.
Debts - statements are prepared by the accounts department, then the acting professional will chase these up, with the partners taking a view as the whether further action needs to be taken for non-payment ie small claims court
Why is accurate time recording vital?
Accuracy & Efficiency & Transparency
Cost Management
Billing & Invoicing
Project Management
Performance Evaluation
How do you record your time?
On a time sheet against an individual client code
How are unpaid fees actioned in the firm?
Debts - statements are prepared by the accounts department, then the acting professional will chase these up, with the partners taking a view as the whether further action needs to be taken for non-payment ie small claims courtwhwha
What is the difference between Management & Company Accounts?
Management - Used internally by managers of the business
Company - Required by law and audited by a Chartered Accountant
Why should you keep accounts?
Keep track of money coming in & going out
Monitor profit & loss & company performance
Use info for future planning
use info to highlight problem areas that need to be investigated & resolved
Submission of annual financial statements to Companies House
Legal requirements - Companies Act Ltd Companies - end of year accounts
What is meant by Gross & Net
Gross - profit/salary before deductions
Net - Profit/salary after deductions
What is depreciation in relation to a fixed asset?
Systematic reduction in recorded cost of a fixed asset ie machinery
What is the difference between a Sole Trader, Partnership, Limited & LLP?
Sole Trader
Exclusive Owner
Entitles to all the profits after tax etc
Unlimited Liability
Partnership
Two or more individuals own/operate the business
Owners are equally & personally liable for the business
Limited
Shareholders liability limited to amount of equity originally invested
If becomes insolvent shareholders personal assets are protected
Shares are not offered to general public (distinguishes from a PLC)
Limited Liability Partnership
Some/all of the partners have limited liability
One partner is not responsible/liable for another partners misconduct or negligence
