Accounting Principles and Procedures

Question 1

What is a Balance Sheet

Answer 1

Statement of financial position, showing assets and liabilities at any given date (usually end of financial year)
- Assets = Cash, Property, other investments
- Liabilities = Borrowings, overdrafts, loans

Question 2

Profit and Loss account

Answer 2

Summary of business’ income and expenditure, prepared usually on an annual basis

Question 3

Cash Flow Statement

Answer 3

Shows all actual receipts and expenditure, including VAT

Question 4

What are Management accounts

Answer 4

Internal use only, NOT audited and used for decision making – planning for future and forecasting.

Question 5

Financial accounts

Answer 5

For External use and are audited accounts to be sent to HMRC

Question 6

What are Generally Accepted Accounting Principles (GAAP)

Answer 6

Standard accounting rules that accountants must follow when compiling financial statements

Question 7

What should be included in Public Limited Company Accounts

Answer 7

• Chairman’s statement
• Independent auditor’s report
• Profit and loss account
• Balance sheet
• Corporate governance report
• Remuneration report
• Other statutory information

Question 8

Public limited company vs Private limited company