Please enable JavaScript.
Coggle requires JavaScript to display documents.
Accounting principles and procedures (Basic accounting prinicples (Income…
Accounting principles and procedures
Basic accounting prinicples
Income statement
(profit and loss accounts)
statement of comprehensive income (FRS 102)
A report of a companies financial performance- income, expenditure and profit or loss of the company over a period of time
revenue
gains
expense
losses
balance sheets
statement of financial position (FRS 102)
what a company owns (assets) and what it owes (liabilities) at a
given point in time.
cash flows
statement
shows the exact amount of a company's cash inflows and outflows, traditionally over a one-month period. It captures the current operating results and changes on the balance sheet.
Forecast
predicts a company's cash inflows and outflows, traditionally over a one-month period.
purposes of accounts
For your own business accounts.
For assessing the covenant strength of potential tenants and landlords.
For assessing the financial strength of contractors and those tendering for contracts.
For profits-method valuations (for leisure properties).
For assessing competition.
management accounts
Management accounts are for the internal use of the management team. (no standards)
financial accounts
Financial accounts are the company accounts required by law over a year, showing profitability.
VAT
Financial
standing
Key financial statements that all companies must provide include;
Income statement (profit and loss accounts)
balance sheet
cash flow
Investigate financial status
Insolvency
Company health
Ratio analysis
( to assess a company’s financial strength)
Gearing ratios
information on the relationship between the exposure of the business to loans as opposed to share capital. (debt vs capital) Shows the extent to which operations are funded by lenders vs shareholders.
Investment/shareholders
information to enable decisions to be made on the extent
of the risk and the earning potential of a business investment.
Profitability
how effective the company is at generating profits given sales and/or its capital assets.
Financial
the rate at which the company sells its stock and the efficiency with
which it uses its assets.
Liquidity ratios
the ability of the company to pay its way (solvency). More companies fail due to cash flow than any other reason.
Legislation
The companies Act 2006
Principal legislation governing reporting in the UK.
Became law 2009
Aims:
Modernise & simplify company law
To codify directors duties
To grant improved right to shareholders
To simplify the administrative burden carried by UK companies
Private companies must keep accounting records for 3 years from the date they were made. Public companies must keep them for 6 years.
Generally Accepted Accounting Principles (GAAP) (2015)
Overall body of regulation establishing how company accounts must be prepared
FRS 102 (2013) The Financial Reporting Standard Applicable in the UK
FRS 101 (2012) The Reduced Disclosure Framework
FRS 100 (2012) The Financial Reporting Standard Applicable in the UK
FRS 103 Insurance Contracts
FRS 104 Interim Financial Reporting
FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime
the standard adopted by the Securities and Exchange Commission (SEC) in the U.S.
Governing bodies
Companies House
responsible for examining and storing info. delivered under the Companies Act and related legislation.
#
A company must deliver every year to Companies House - even if the company is dormant
Corporate Reporting Council
is advisory to the
Financial Reporting Council (FRC)
who set the UK accounting standards
#
The Partnerships (Accounts) Regulations 2008
Basic accounting prinicples
• Revenue and capital expenditure
• Auditing
• Credit control
Taxation
Capital allowances