Accounting principles

Question 1

What is the purpose of a balance sheet?

Answer 1

Understand the business financial position at a certain point in time

Question 2

Difference between balance sheets, income statement, cash flow statement?

Answer 2

Balance sheets - statement of assets, liabilities, equities of company at a given time
Income statement – revenue and expenses, net profit or loss
Cash flow statement - movement of cash/equities entering and leaving company over a given time

Question 3

What do you find on property management accounts?

Answer 3

Profit and loss
Balance sheet
Cash flow statement
Short report

Question 4

What is the difference between statutory accounts and management accounts?

Answer 4

Statutory accounts - more technical and in-depth. Produced to a generic format and a legal requirement.
Management accounts - produced for internal decision-making, can focus on specific matters and timeframes. Not a legal requirement.

Question 5

What is Fair Value?

Answer 5

Fair Value is true worth of an asset/liability by looking at factors like potential for growth, cost to replace, etc. Accounts purposes
Market value is value observed and actual value the asset/liability transacted.