Accounting Principles Flashcards
What is accounting?
Process of recording financial transactions pertaining to business
What are the different types of accounting?
Financial (external) and Management (internal)
What are the different types of financial statements?
Profit and Loss Statement (Gewinn und Verlustrechnung) - Income v Expenditures
Balance Statement (Bilanz) - Assets v Liabilities
Cashflow Statement (Kapitalflussrechnung) - Inflow and Outflow
Why do surveyors need to understand financial statements?
- Aid in own business account
- Assess financial strength of contractor
- Assessing competition
How would you assess financial statements?
- Calculate ratios myself
- Pass to client’s accountant for detailed review
- Check companies at Bundesanzeiger (Federal Gazette)
Where can you find financial status of a company if not FS is not received?
Bundesanzeiger (Federal Gazette)
What are the measures in case of insolvent contractor?
- Consider performance bond
- Review tender submission
- Check accuracy in interim valuation
- Consider project bank account
What is insolvency?
Inability to pay debts
What is HGB?
Handelsgesetzbuch (German Commercial Code) - establishes framework for how financial infromation is recorded, summarized and communicated in Germany
What is IFRS?
International Financial Reporting Standards - Also used in Germany as part of EU
Explain your understanding of tax depreciation
The declining value of an asset is offset against taxable profit. The depreciation is recorded as an expense in order to reduce taxable income)
What is an escrow account?
Account where money transferred between parties via an intermediary; held securely until parties have met their contractual obligations
