Accounting Principles Flashcards
Why does a QS need to understand company accounts?
In case they want to open their own business
Evaluate financial strength of tenderers
What is a Balance Sheet?
A snapshot in time of what a company is worth
Assets - Vans, land, equipment
Liabilities - Wages, loans, expenses
What is a Profit and Loss Account?
A financial statement showing a company’s net profit or loss in a given period
What’s included in a profit and loss account?
Turnover
Cost of Sales
-Gross Profit
Admin Expenses
Operating Profit
What’s the difference between a balance sheet and a profit and loss account?
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
What is your company’s turnover?
£93 million turnover
£17 million profit before tax
What’s a Cash Flow Statement?
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
What’s a Cashflow Forecast?
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
Why have a cashflow?
Client understands financial commitment
Make preparations and plan
What if a cashflow is over/under?
Ahead of programme. Ensure valuations are accurate
Behind programme
What’s an S Curve?
A chart in the shape of an S. Percentage of cashflow plotted throughout duration of project.
What is VAT?
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%
What is Bankruptcy?
A legal declaration, your inability to pay creditors
What is Insolvency?
Inability to pay off creditors
What are the signs of insolvency?
Slowing down of works
Changes in management
Overclaims
Complaints of sub-contractors
Steps taken when a contractor goes insolvent?
Identify insolvent
Secure site
Inform bondsman
Take ownership of materials
Withold payments
What does Audit mean?
The evaluation of a person or organisation
How is insolvency handled?
Liquidation
Administration
Recievership
What is Liquidation?
When a company is being wound up, assets sold off to pay creditors
What is Administration?
An Administrator is appointed by shareholders. Get the best price for assets and act in the best interests of the shareholders.
What is Recievership?
A Reciever is appointed to recieve assets and pay back lenders.
What is Turnover?
Income or revenue a company recieves for business activities
What are Capital Allowances?
Tax relief on tangible capital expenditure; 18%
What is CAPEX?
Capital Expenditure - amounts spent to acquire/improve long term assets (equipment/buildings)
