Accounting Principles

Question 1

What is a financial account

Answer 1

reports company transactions
often profits and loss
-balance sheet
-cash flow statement

Question 2

What is a credit check

Answer 2

-details about finances
e.g existing debts
credit available

Question 3

What is a profit and loss statement

Answer 3

-Shows the money the money that has come in and gone out over a specific period
-Shows how the income (top line) is transformed into the bottom line (profit) after all expenses and revenues have been deducted over a set period of time.

Question 4

Why is a profit and loss useful?

Answer 4

Allows comparison to previous years

Question 5

What is a balance sheet

Answer 5

-A snapshot of a companies financial position
-A financial report which summarises the companies financial position at a specific point in time.
-It details the companies assets and liabilities at a specific point in time

Question 6

What assets would you find on a balance sheet

Answer 6

-cash, property and other investments

Question 7

What liabilities would you find on a balance sheet

Answer 7

-Borrowing, overdrafts, loans

Question 8

What does a balance sheet show?

Answer 8

-Can a company pay bills on time

Question 9

What is a cash flow statement

Answer 9

• a financial report that shows where a business’ money is coming from and going

Question 10

Whats the difference between a cash flow statement and balance sheet

Answer 10

-Balance sheet = specific point in time
-Cash flow = period of time
-Profit and loss = period of time

Question 11

What is an asset valuation

Answer 11

Asset valuation is the process of determining the current value of a company’s assets

Question 12

What is management accounting

Answer 12

Aimed at internal users such as management or board of director’s.
a method of accounting that creates statements, reports, and documents that help management in making better decisions related to their business’ performance.

Question 13

Why are accounting principles relevant to your pathway

Answer 13

-Could set up own practice so basic knowledge is required
-At Lidl accounting principles are required for business partner checks for buying selling sites and when using any external consultants

Question 14

What accounts must a private company need to issue

Answer 14

-balance sheet
-profit and loss

Question 15

What is the role of an auditor

Answer 15

-independent report as to whether the company has prepared its financial statements in accordance with Company Law

Question 16

What is UK GAAP?

Answer 16

Regulation body establishing how company accounts must be prepared in the UK

Question 17

What is ratio analysis

Answer 17

Purpose is to assess a companies financial stength
Measures the ability of the company to pay off current liabilities by converting assets into cash

Question 18

Where would you go to check the cov strength of a company?

Answer 18

Dunn and Bradstreet

Question 19

Whats the difference between management accounting and financial accounts

Answer 19

-Management accounts are internal
-Financial are required by law

Question 20

What is insolvency

Answer 20

-inability to pay debts

Question 21

What is companies house

Answer 21

-Limited companies

Question 22

What are the limitations of Dunn and Bradstreet Credit checks

Answer 22

-It is limited only to the latest submitted documents on companies house.

Question 23

what is the definition of an income statement?

Answer 23

An income statement shows a business’s profits and losses