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3 APC_J Brookes > Accounting Principles > Flashcards

Accounting Principles Flashcards

1
Q

Why does a QS need to understand company accounts?

A

In case they want to open their own business
Evaluate financial strength of tenderers

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2
Q

What is a Balance Sheet?

A

A snapshot in time of what a company is worth

Assets - Vans, land, equipment
Liabilities - Wages, loans, expenses

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3
Q

What is a Profit and Loss Account?

A

A financial statement showing a company’s net profit or loss in a given period

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4
Q

What’s included in a profit and loss account?

A

Turnover
Cost of Sales
-Gross Profit
Admin Expenses
Operating Profit

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5
Q

What’s the difference between a balance sheet and a profit and loss account?

A

Balance Sheet reports the company’s worth at a specific point in time

Profit and Loss summarizes profit made over a specific period of time

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6
Q

What is your company’s turnover?

A

£93 million turnover
£17 million profit before tax

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7
Q

What’s a Cash Flow Statement?

A

Indicates how much money is running through a company at any time

Stage 1 - money coming in from operating activities
Stage 2 - deduct cashflow from non business activities
Stage 3 - share sales

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8
Q

What’s a Cashflow Forecast?

A

Forecasting when money will be drawn down on a project

Created based on packages on the programme
Gives client understanding of financial commitment
Plotted on an S Curve

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9
Q

Why have a cashflow?

A

Client understands financial commitment
Make preparations and plan

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10
Q

What if a cashflow is over/under?

A

Ahead of programme. Ensure valuations are accurate

Behind programme

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11
Q

What’s an S Curve?

A

A chart in the shape of an S. Percentage of cashflow plotted throughout duration of project.

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12
Q

What is VAT?

A

Value Added Tax

Tax added to goods and services where value is added

Standard 20%
Reduced 5% (energy saving)
Zero 0% (Residential new build)
Exempt 0%

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13
Q

What is Bankruptcy?

A

A legal declaration, your inability to pay creditors

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14
Q

What is Insolvency?

A

Inability to pay off creditors

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15
Q

What are the signs of insolvency?

A

Slowing down of works
Changes in management
Overclaims
Complaints of sub-contractors

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16
Q

Steps taken when a contractor goes insolvent?

A

Identify insolvent
Secure site
Inform bondsman
Take ownership of materials
Withold payments

17
Q

What does Audit mean?

A

The evaluation of a person or organisation

18
Q

How is insolvency handled?

A

Liquidation
Administration
Recievership

19
Q

What is Liquidation?

A

When a company is being wound up, assets sold off to pay creditors

20
Q

What is Administration?

A

An Administrator is appointed by shareholders. Get the best price for assets and act in the best interests of the shareholders.

21
Q

What is Recievership?

A

A Reciever is appointed to recieve assets and pay back lenders.

22
Q

What is Turnover?

A

Income or revenue a company recieves for business activities

23
Q

What are Capital Allowances?

A

Tax relief on tangible capital expenditure; 18%

24
Q

What is CAPEX?

A

Capital Expenditure - amounts spent to acquire/improve long term assets (equipment/buildings)

25
Q

What is OPEX?

A

Operating Expenditure - revenue expenditure; ordinary business (sales/wages)

26
Q

Why have separate CAPEX/OPEX budgets?

A

Different tax obligations
CAPEX benefit from capital allowances

27
Q

What is the ratio for Liquidity?

A

Current Assets/Current Liabilities

Acid Test - Same as above but excluding stock

1, represents high liquidity

28
Q

Management Account vs Statutory (Company) Account?

A

Management Account - for internal purposes and presented in anyway. Can include KPIs and aides internal decision making

Staturory (Company) Account - annual account to companies house: Profit and Loss; Director Info; Balance Sheet; Cashflow

29
Q

What is Credit Control?

A

Process of making sure your customers/clients don’t take too long to pay

30
Q

What checks can you do at pre-contract?

A

Bank references
Credit checks - Dunn and Bradstreet
Annual Accounts
Previous references

31
Q

What are the signs of low financial strength?

A

Low credit rating
Falling cashflow
Rely on loans

32
Q

What’s an LLP?

A

Limited Liability Partnership - benefits of limited liability but allows a partnership structure

33
Q

What is the Companies Act?

A

Regulates how companies adhere to running a business

34
Q

What’s a CCJ?

A

County Court Judgement

Failure to pay
Money you owe

35
Q

What are Contingent Liabilities?

A

Incurred from uncertain future events

36
Q

Do you know any ratios?

A

Gearing
Solvency: loans% equity
Profitability: net profit before tax % capital employed

37
Q

How often audited?

A

Large companies - annually

38
Q

LLP vs LTD?

A

Both are Limited
LLP allows for partnership structure and spread of risk

3 APC_J Brookes (16 decks)

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