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Flashcards in Financial Statements Deck (88)
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1

What are the fundamental qualities characteristics

Relevance and Faithful representation

2

What are the enhancing qualitative characteristics?

Comparability
Verifiability
Timeliness
Understandability

3

What are underlying assumptions?

It is assumed that accounts are prepared on the accrual basis as a going concern.

4

What other accounting concepts are there?

Business Entity
Materiality and Aggregation
Offsetting
Consistency

5

What five classes of items make up financial statements?

Assets
Liabilities
Equity
Income
Expenses

6

When should an item be recognised in a companies accounts

If it is probably that future economic benefit will flow to/from the entity
It's cost can be reliably measured

7

In what ways can a cost be measured

Realisable Value - what it could be sold for today
Current cost - what it would cost to replace it
Present value - value at the present discounted value of future cash flows.

8

What are the five Ethical principles

Integrity
Objectivity
Professional competence and Due care
Confidentiality
Professional behaviour

9

What are the potential threats to the fundamental ethical principles

Self Interest
Self review
Familiarity
Intimidation
Advocacy

10

What is meant by integrity?

Being straight forward and honest in all professional and business transactions

11

What is meant by objectivity?

Not allowing bias, conflict of interest or the undue influence of others to override professional judgement

12

Professional competence and due care

Maintain professional Knowledge and skills.

13

What is meant by confidentiality

Information acquired as a result of professional and business relationships should not be disclosed the third parties except when there is a legal or professional reason to do so.

14

What is meant by professional behaviour

Comply with relevant laws and regulations and avoids bringing the profession in to disrepute.

15

What must a business do before it can operate as a private limited company

Register with companies house, the process known as incorporation

16

What documents must be submitted to companies house to form a limited company?

Application form used to register the company
Memorandum of Association
Articles of Association

17

What is the minimum number of directors and shares needed to form a private limited company

1 director and 1 share.

18

What must a company have to become a public limited company?

Issued share capital over £50,000
At least two share holders and two directors
A qualified company secretary

19

What is Authorised share capital?

The total number of shares a company is allowed to issue as detailed in it's articles

20

What are ordinary shares?

These are standard shares with highest risk and reward. They are paid a variable amount when profit is distributed and are last to be paid if the company makes low profits or is wound up

21

What are preference shares

Shares that hold preferential treatment, so have lower risk and reward.
When profit is distributed these shares are paid a fixed amount, and are paid first if the company makes low profits or is wound up

22

What are the different prices that may be referred to with Shares?

Nominal Value - allowed value detailed on the Co House records
Market Value - this is likely to be higher than nominal value
Share premium - the difference between a shares nominal value and is market sale value is known as share premium.

23

What are Debenture certificates?

These can be issued for fixed amounts, interest is payable on them at a fixed amount irrespective of profit level.
These are a relatively low risk as they are often secured against assets.
They are for fixed terms such as 5 or 10 years

24

What should be included in a complete set of financial statements under IAS 1?

Statement of Financial Position - BS
Statement of Profit & loss & other comprehensive income
Statement of changes in Equity
Statement of Cash flows

25

What order are assets and Liabilities listed on the SoFP

In order of liquidity - Least liquid to most.

26

What does IAS 1 relate to

The presentation of Financial statements

27

What overriding concepts does IAS 1 require

Going Concern
Accrual basis

28

What does IAS 16 relate to

Property, Plant & equipment

29

What principle issues are covered by IAS 16

Recognition of assets
Determination of their carrying amount
Depreciation charges and Impairment losses to be recognised.

30

How is the initial cost of PPE measured?

Purchase price including import duties and other taxes
Any costs directly attributable to bringing the asset to the location and condition for it's intended use
Estimated costs of dismantling and removing the asset at the end of it's useful life