Accounting Principles

Question 1

What is UK GAAP and what is included?

Answer 1

One of two available accounting standards in the UK (as per Companies Act 2006). GAAP is regulated by the FRC in UK&I and provides six financial standard documents for companies to comply with when producing their financial statements. FRS 102 in particular provides guidance on the preparation of P/L accounts, cash flow statements and balance sheets.

Question 2

Name some ratios relating to financial statements

Answer 2

Gearing ratio - debt-to-equity ratio - shows a business is financing its operations in terms of risk

Quick ratio - curent assets / current liabilities - indicates the company’s ability to instantly use its near-cash assets (assets that can be converted quickly to cash) to pay down its current liabilities