Accounting Principles and Procedures Flashcards
(14 cards)
What is the accounting standard we use?
Generally accepted accounting principles
Or
International Financial reporting standards
What does the GAAP and IFRS cover?
The standards for accounting including what is makes up and is defined in each accounting statement
What are the three main account reports?
- Balance sheet
- Profit and Loss
- Cash flow forecasts
What is the difference between a management account and statutory account?
A statutory account is a legally required account that must be published with HMRC to determine corporation tax etc. Management accounts are used to assess the financial health of a company at any time.
When are audits required?
If you hit 2 of the following:
1. If you turnover more than £15m
2. Assets worth more than £7.5m
3. 50 or more employees
What is the role of an auditor?
An auditor is a third party accountant that verifies the validity of your accounts for publishing
Who is responsible for the publishing of accounts
The directors
What is the role of property within an entities accounts
A property goes on the balance sheet as an asset if owned and can be used to gain credit
What is cash flow?
Cash flow is the ability of a company to pay of its short term debts quickly
Why is good cash flow important?
It allows the business to temper short term liabilities without the risk of insolvency.
What are three key accounting ratios?
- Profitability ratio
- Gearing ratio (debt to SH funds)
- Liquidity ratio
What forms a balance sheet
All the companies assets and liabilities at a given point in time
What forms a profit and loss account
The revenues and expenditure of a company over a given period usually 12 months
How would you make a cash flow forecast?
Assess the incomes and outgoings of a business or project over a period of time based on programme or ‘s curve’ method
