Flashcards in Financial Statements Deck (88)
What are the fundamental qualities characteristics
Relevance and Faithful representation
What are the enhancing qualitative characteristics?
What are underlying assumptions?
It is assumed that accounts are prepared on the accrual basis as a going concern.
What other accounting concepts are there?
Materiality and Aggregation
What five classes of items make up financial statements?
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
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.
What are the five Ethical principles
Professional competence and Due care
What are the potential threats to the fundamental ethical principles
What is meant by integrity?
Being straight forward and honest in all professional and business transactions
What is meant by objectivity?
Not allowing bias, conflict of interest or the undue influence of others to override professional judgement
Professional competence and due care
Maintain professional Knowledge and skills.
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.
What is meant by professional behaviour
Comply with relevant laws and regulations and avoids bringing the profession in to disrepute.
What must a business do before it can operate as a private limited company
Register with companies house, the process known as incorporation
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
What is the minimum number of directors and shares needed to form a private limited company
1 director and 1 share.
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
What is Authorised share capital?
The total number of shares a company is allowed to issue as detailed in it's articles
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
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
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.
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
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
What order are assets and Liabilities listed on the SoFP
In order of liquidity - Least liquid to most.
What does IAS 1 relate to
The presentation of Financial statements
What overriding concepts does IAS 1 require
What does IAS 16 relate to
Property, Plant & equipment
What principle issues are covered by IAS 16
Recognition of assets
Determination of their carrying amount
Depreciation charges and Impairment losses to be recognised.