Accounting Principles and Procedures

Question 1

What are some accounting concepts?

Answer 1

Going concern
Business entity
Accounting period
Accrual

Question 2

How would you interpret company accounts?

Answer 2

One way is assessing covenant strength - e.g. profits test

Question 3

How are assets and liabilities addressed in financial statements?

Answer 3

They are addressing in a company’s balance sheet. Can range from current to non current.

Question 4

What is included in company accounts on companies house?

Answer 4

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

Question 4

What is a balance sheet?

Answer 4

A financial document showing a company’s assets and liabilities. Reported quarterly or annually.

Question 5

What is an income statement?

Answer 5

Also known as a profit and loss account. Shows the income and expenditure of a company and is carried out quarterly or annually.

Question 6

What is a cash flow statement?

Answer 6

Financial document showing the movement of money. Snapshot in a point in time.

Question 6

What is IFRS?

Answer 6

International Financial Reporting Standards - Global standards for financial reporting.

Question 7

What is GAAP?

Answer 7

Generally accepted accounting procedures. Applies to the UK and is good practice for reporting on accounts.

Question 8

What IFRS Standard relates to leases?

Answer 8

IFRS 16 relates to how leases should be reported in finance documents. Leases should be accounted for on a balance sheet.

Question 8

What is the difference between GAAP and IFRS?

Answer 8

GAAP is typically used for smaller businesses, IFRS is used for publicly and globally trading companies such as PLC’s.

Question 8

What are some accounting ratios?

Answer 8

Liquidity
Gearing
Profit