Accounting Principles and Procedures Flashcards
(34 cards)
What is a Financial Statement?
Written records that show the financial performance of a company.
They include:
- Balance sheet
- Profit and loss statement
- Cashflow statements
and explanatory notes
What are the 3 Primary Types of Accounts?
Balance Sheet (Statement of financial position)
Profit and Loss Statement (Income statements)
Cash Flow Statement
What is a Balance Sheet?
A Financial Snapshot
Over a period of time.
Liabilities and Assets.
What is a Profit and Loss Statement?
Financial Performance over am accounting period.
Revenue, Costs and Expenses.
What is a Cashflow Statement?
A cashflow statement measures the strength, profitability a company.
Total money being transferred in and out of the business.
Shows liquidity.
Assets and Liabilities trough the business
What are Management Accounts?
Provide information to managers to help the decision-making process on staff and resources etc.
What are Financial Accounts?
Statutory
Intended for shareholders, creditors and external parties.
Where does Capital Expenditure sit in Accounts?
Capital expenditure and deferred revenue sit on the Blanace Sheet
Where does Revenue Expenditure sit in Accounts?
Revenue expeniture is in the Profit and Loss Statement
What are Fixed Assets?
Fixed assets are used in the business long term:
- capital equipment
- land and buildings
- vehicles
What are Current Assets?
Current assets are held short term and not in use for the business:
- stock
- debtors
- cash
How are Taxable Profits Calculated?
The trading profit with capital allowances deducted and the addition back of disallowable expenses (entertainment, depreciation, penalties, etc)
What are Filling Deadlines?
12 months after the accounting period for Corporation Tax ends.
What are the Penalties for Missing the Filling Deadlines?
Failure to provide a tax return on time can be:
- Non-deliberate: 30% of tax owed
- Deliberate Not Concealed: 70% of tax owed
- Deliberate Concealed: 100% of tax owed.
Penalties for filing more than six months late can include £1,500.
From CA perspective could result in a nil value for capital allowances
Refer to HMRC guidance for exact amounts for other periods.
What is Compliance?
Abiding by tax laws and regulations
Corporation Tax Act 2010
Capital Allowances Act 2001
What are the Penalties for Failure to Comply?
Failure to comply will result in penalties, fines or even prison.
What are Research and Development Allowances (RDA’s)?
Research and Development Allowances
100% tax relief on eligible capital expenditure.
R&D takes place when a project seeks to advance science or technology.
How do R&D Allowances interact with Accounting Profits?
The relief is available on capitalaised costs (in the balance sheet) therefore it reduces the taxable profit.
R&D tax credits are expensed items put through the profit and loss.
Why do you request Fixed Asset Additions?
The fixed asset additions show the actual payments that have been made.
They contain land, buildings, capital equipment.
Why is it important to reconcile claims to the Fixed Assset Additions?
To ensure claims reconcile to actual expenditure incurred.
So there are no over or under claims.
What is the difference between Revenue and Capital?
Capital Expenditure is expenditure incurred for the enduring benefit of the trade, for improvements or replacements of whole assets, or more then 50% of an integral feature in 12 months.
Revenue Expenditure is on repairs or like for like replacements.
What is the HMRC Review Provcess?
-Submit the claim (reviewed by software)
-Flagged for a detailed review
-Can be a part or full review
-They Can ask for more information
-Closed or meet with HMRC to discuss
What is UK GAAP?
UK’s Generally Accepted Accounting Principles
Considered more rules-based
Different GAAP across the world
Smaller business tend to use GAAP- there are reduced disclosure options using GAAP
What is IFRS?
International Financial Reporting Standards
Set of accounting rules for financial statements to be consistent, transparent and easily comparable.
Considered more principle-based
A single method of showing financial accounts across countries
Includes treatement of intangible assets (goodwill, R&D, Advertising costs)
