Principles & Procedures Flashcards
(25 cards)
What is included in a set of public limited company accounts?
-Chairman’s statement
-independent auditor’s report
-Income statement (P&L account)
-Statement of financial position (balance sheet)
-Corporate governance report
-Remuneration report
What is included in private limited company accounts?
Similar to public limited company accounts but may have to file less information if they qualify as a small company (less than 50 employees/turnover of 10.2M or less/balance sheet of under 5.1M).
This means a small company can file abridged accounts- no audit requirement, P&L or director report.
What is a balance sheet?
A statement of a business’s financial position showing its assets and liabilities, usually at the end of a financial year
What are assets?
Everything a company owns e.g.
-Cash
-Property
-Debtors
-Other investments
*Usually shown on left side of a balance sheet
What are liabilities?
Everything a company owes e.g.
-borrowings
-overdrafts
-loans
-creditors
*usually shown on the right side of a balance sheet
what is the basic balance sheet equation?
assets = liabilities + equity
What is equity?
Equity is the amount of money that would be returned to the owners (shareholders) if the company’s assets were sold and all liabilities were paid off
What is a profit and loss account?
Also known as an income statement, a P&L account is a summary of the business’s income and expenditure transactions, usually prepared annually
What’s the difference between management and statutory accounts?
Management accounts are prepared for internal use by a business and are not audited.
Statutory accounts are prepared for external use by a certified accountant and filed with Companies House within 9 months of the company’s financial year end.
What is a cash flow statement?
A financial statement that shows all the cash inflows and outflows of a company from operations, investing and financing- includes VAT
What is IFRS16?
International Financial Reporting Standards- it is a lease accounting standard that central government departments are required to use and comply with.
The full cost of leases have to be accounted for on the balance sheet and recorded as a liability. (SC payments accounted for separately)
What is an intangible asset?
A non-physical asset such as a brand, trademark, patent or copyright
What’s the difference between a profit and loss statement and a balance sheet?
A balance sheet provides a snapshot of a company’s financial position at a point in time. Whereas a profit and loss statement reports on a company’s financial performance over a period of time.
What are the two main financial accounting standards?
IFRS (International Financial Reporting Standards) and GAAP (Generally Accepted Accounting Practice)
What’s the difference between GAAP and IFRS?
GAAP is rules based whereas IFRS is principles based- bigger focus on professional judgement. GAAP used in the US, IFRS used in most other markets around the world.
What’s the difference between the International Accounting Standards (IAS) and IFRS?
IFRS replaced the IAS in 2001. They have been adopted by most major markets around the world.
When was IFRS16 first issued and from when was it effective?
First issued in 2016 and effective from 1st Jan 2019
Why was IFRS16 introduced?
To increase transparency and accuracy of financial reporting for leased assets- many companies were not including large lease obligations on their balance sheet and treating them as freehold
Which leases does IFRS16 not apply to?
leases to explore for, or use, minerals, oil, natural gas (natural resources)
licenses of intellectual property
What is the role of an independent auditor?
An external chartered accountant who reviews and verifies a company’s financial records- checking for obvious fraud/errors. This is filed along with financial statements to Companies House
What is the financial year dates?
6th April- 5th April the following year
When must private limited companies’ file accounts at Companies House?
First accounts- 21 months after the date your registered with Companies House
Annual accounts- 9months after your companies’ financial year ends (accounting reference date- the anniversary of the last day of the month of company incorporation)
When must public limited companies file accounts at Companies House?
First accounts- 18 months after registering
Annual- 6 months after your companies financial year ends (accounting reference date- the anniversary of the last day of the month of company incorporation)
What are the penalties for late filing with Companies House?
Public company- from £750 for less than a month late up to £7,500 for more than 6 months late
Private company- from £150 for less than one month late to £1,500 for more than 6 months late
