Accounting

Question 1

Corporation tax?

Answer 1

Based on annual profits.

Question 2

Company accounts, why?

Answer 2

Tax purposes. Demonstrate financials.

Question 3

Financial accounts vs management accounts?

Answer 3

Financial accounts are external and filed with Companies House, management accounts are internal.

Question 4

What is an escrow account?

Answer 4

Holding bank for moneys not released until conditions are met.

Question 5

What is a project bank account?

Answer 5

Ring-fenced bank account for payments to be made to supply chain members.

Question 6

What is tax depreciation?

Answer 6

Expense claimed by a taxpayer on tax returns to compensate for the loss in value of tangible assets.

Question 7

Name three accounting ratios?

Answer 7

Liquidity, profitability, gearing.

Question 8

What are capital allowances?

Answer 8

Allows taxpayers to get tax relief by deduction against annual taxable income.

Question 9

What are the key financial statements and documents?

Answer 9

Cash flow statement.
Profit and loss statement.
Balance sheet.

Question 10

Gross vs net?

Answer 10

Gross is before deductions, net is after.

Question 11

What is equity?

Answer 11

Value that someone has in a business.

Question 12

Why should surveyors understand company accounts?

Answer 12

Assess financial health of competitors.
Assess financial stability of tenderers.
Aid in preparing financial accounts in their own company.

Question 13

What is CAPEX?

Answer 13

Spent to acquire or improve an asset like equipment and buildings.

Question 14

What is Revenue Expenditure? OPEX

Answer 14

Operating expenditure, in day to day running of the business.

Question 15

What is a balance sheet?

Answer 15

A snapshot of financial position at a point in time. Shows assets, liabilities and equity.

Question 16

What is a current asset?

Answer 16

Cash and other assets to be converted into cash within a year.

Question 17

What is a fixed asset?

Answer 17

Long term, difficult to be converted quickly into cash.

Question 18

What is a cash flow forecast used for?

Answer 18

Future planning.
Overdue payments.
Cash gaps/surplus.
Track spending targets.

Question 19

Why is cashflow important for construction projects?

Answer 19

Understand commitment over project duration.
Gain external funding where needed.
Indication of financial difficulty.

Question 20

What is insolvency?

Answer 20

Inability to pay off debts.

Question 21

Why would you not appoint a contractor with a low credit rating?

Answer 21

Risk of insolvency and poor performance.

Question 22

How do you determine financial standing of a company prior to doing business?

Answer 22

Dun & Bradstreet report creates a business credit report.

Question 23

Signs of contractor insolvency on a construction project?

Answer 23

Slowing works.
Low supply of materials.
Increase defects.
Management changes.
Inflated payment requests.

Question 24

What would you do in the event of contractor insolvency?

Answer 24

Inform all parties involved.
Inform the bondsman (bank/insurance firm).
Stop payments to the contractor.
Terminate contract.

Question 25

Administration vs liquidation?

Answer 25

Administration is where someone is appointed to manage company affairs for the creditors.
Liquidation is shutting down and selling off assets to pay creditors.

Question 26

What is bankruptcy?

Answer 26

Deal with debts they cannot pay through individuals.
Assets shared amongst those you owe money to.

Question 27

Principles of GAAP?

Answer 27

Regularity
Consistency
Sincerity
Permanence of Methods
Non-Compensation
Prudence
Continuity
Periodicity
Materiality
Utmost Good Faith

Question 28

What is the Construction Industry Scheme?

Answer 28

Contractors directly deduct money from subcontractors payments and pass it to HMRC.

Question 29

Where does depreciation fall on a P/L statement?

Answer 29

Expenses.