Accounting Principles & Procedures Flashcards
What is a public limited company?
- Company where shares are sold to the public on the stock market.
- Shareholders are part of the business and have a say on how it operates
- Improves its ability to raise capital
- Company registered under the Companies Act 1980
What is a sole trader?
- Business owned and run by 1 person
- Have unlimited liability and the owner is responsible personally for the debts of the business
What is a partnership?
- Where owners all share responsibility for a business
- Can be a LLP meaning partners have limited liabilities
What is a private limited company?
- Has limited liability
- Owners are known as shareholders
- Can purchase shares in the company
What are the contents of a public limited company’s accounts?
- Chairman’s statement
- Independent Auditor’s report
- Income statement (profit and loss)
- Balance sheet
- Corporate governance report
- Remuneration report
What is the difference between management and statutory accounts?
- Management accounts – prepared for internal use, not audited
- Statutory accounts – audited by a chartered accountant
What are consolidated accounts?
- Individual subsidiary accounts for a company within a single set of accounts
What is a balance sheet?
- Statement of the financial position of a business
- Shows assets and liabilities
- Assets – cash, property, investments, etc
- Liabilities – debt, loans, creditors
Where might property be featured in accounts?
- Balance sheet
- Listed as an asset
What is a profit and loss account?
- Summary of business’ income and expenditure
- Prepared on an annual basis
What is a cash flow statement?
Shows all the actual receipts and expenditure to include VAT
What are the implications of IFRS 16?
- The full cost of leases must be accounted for on a balance sheet
- Liability to pay rent must be listed as a liability
What is a Creditsafe report and what is contained in it?
A credit report summarising the key financials and ownership of the company.
- Summary of the company (registered address, SIC code, nature of the business, etc)
- Creditsafe score
- Financial information (turnover, profit & loss, balance sheet, cash flow)
- Directors
- CCJS
What would you do if you didn’t have a Creditsafe report?
- Request the last 3 years of audited accounts OR
- Check the company accounts on Companies House
- Check for press
- Request landlord references including rent payment history
- Request bank references
- Improve surety by obtaining a rent deposit or guarantor
What is the profits test?
Net profit must be 3 x the annual rent for 3 consecutive years (must request audited accounts)
