Accounting Principles And Procedures - Level 1 Flashcards
(31 cards)
What are the three types of financial statement you may come across relating to a company?
The three types of financial statements are the income statement, balance sheet, and cash flow statement.
What is an asset / liability?
An asset is a resource owned by a company that is expected to provide future economic benefits, while a liability is an obligation that the company owes to others.
Can you give me an example of each?
An example of an asset is cash, and an example of a liability is a loan payable.
What is the difference between financial and management accounts?
Financial accounts are prepared for external stakeholders, while management accounts are for internal use to aid decision-making.
What do you understand by the term Generally Accepted Accounting Principles (GAAP)?
GAAP refers to a set of rules and standards used for financial reporting.
How do companies know which reporting framework to comply with?
Companies determine the reporting framework based on their regulatory requirements and the nature of their operations.
Which reporting framework do public limited companies have to comply with?
Public limited companies must comply with International Financial Reporting Standards (IFRS).
How would you assess the financial strength of an entity, e.g. for a valuation?
Financial strength can be assessed through various metrics such as profitability, liquidity, and solvency ratios.
Can you tell me about a common financial measure?
A common financial measure is the return on equity (ROE), which indicates a company’s profitability relative to shareholders’ equity.
What is the acid test / ROCE / working capital ratio / gearing ratio / net assets per share?
These are financial ratios used to assess liquidity, profitability, and financial leverage.
Can you tell me what the role of an auditor is?
The role of an auditor is to examine financial statements to ensure they are accurate and comply with accounting standards.
When are audited accounts needed and why?
Audited accounts are needed for regulatory compliance and to provide assurance to stakeholders.
How do public limited company accounts differ? Tell me something you understand from the Companies Act 2006.
Public limited company accounts must be audited and published, as per the Companies Act 2006.
Tell me what it means to prepare accounts in accordance with IFRS.
Preparing accounts in accordance with IFRS means following the international standards for financial reporting.
What is the difference between UK GAAP and IFRS?
UK GAAP is the accounting framework used in the UK, while IFRS is an international standard that may differ in recognition and measurement principles.
What is the basis of valuation under IFRS 13?
The basis of valuation under IFRS 13 is fair value, which is the price that would be received to sell an asset or paid to transfer a liability.
What is fair value?
Fair value is the estimated market value of an asset or liability.
What has changed in relation to lease accounting / IFRS 16?
IFRS 16 requires lessees to recognize most leases on the balance sheet as assets and liabilities.
When did the change come into effect?
The change came into effect on January 1, 2019.
What is FRS 102?
FRS 102 is the Financial Reporting Standard applicable in the UK and Republic of Ireland.
What changes have been made to it?
Changes to FRS 102 include updates to financial instruments and revenue recognition.
How has this impacted upon investment property?
The changes have affected the valuation and reporting of investment properties under FRS 102.
What are statutory accounts?
Statutory accounts are financial statements that companies are legally required to prepare and file.
Why is good financial record keeping important to you?
Good financial record keeping is essential for compliance, decision-making, and financial analysis.
