Accounting Principles and Procedures

Question 1

What is the contents of a set of public limited company accounts?

Answer 1

• Chairmans Statement
• Independent auditor report
• Income Statement (Profit and Loss)
• Statement of financial position (balance sheet)
• Corporate Governance report
• Remuneration report
• Other statutory information

Question 2

What is a balance sheet?

Answer 2

A statement showing it’s assets and liabilities at a given date, usually at the end of the financial year.

(statement of financial position)

Question 3

Can you give me an example of an asset?

Answer 3

Assets can include:
- cash
- property
- debtors
- other investments

Question 4

Can you give me an example of liabilities?

Answer 4

Liabilities can include:
- Borrowings
- Overdraft
- Loans
- Creditors

Question 5

What are assets?

Answer 5

Assets are resources that you own

(i.e. property)

Question 6

What are liabilities?

Answer 6

Liabilities are obligations you have

(i.e. loan)

Question 7

What does P&L stand for?

Answer 7

Profit and Loss Statement

(income statement)

Question 8

What is a profit and loss statement?

Answer 8

(income statement)

It is a summary of the businesses income and expenditure transactions prepared usually on an annual basis.

Question 9

What is a management account?

Answer 9

A Management account is a financial reports produced for the business owners and managers, generally monthly or quarterly, normally a Profit & Loss report and a Balance Sheet.

Question 10

Who uses a management account?

Answer 10

Management accounts are prepared for internal use by a business only.

They are NOT audited.

Question 11

Who prepares audited accounts?

Answer 11

Audited accounts are prepared by a Chartered or Certified accountant.

Question 12

What is an audited account?

Answer 12

a company’s financial records that have been officially examined to check that the company has been maintaining financial records and that it is accurate.

Question 13

What is a consolidated set of accounts?

Answer 13

a set of accounts that combines the financial results of a group of companies, rather than showing the results of each company separately

Question 14

What is a cash flow statement?

Answer 14

This shows all the actual receipts and expenditure to include VAT

Question 15

What does IFRS 16 stand for?

Answer 15

International Financing Report Standards

Question 16

What is a IFRS 16?

Answer 16

IFRS 16 is a lease accounting regulation that requires publicly listed companies to include on their balance sheets all leasing contracts with a contract term longer than one year. Including the following:

• Full costs of leases have to be accounted for on the balance sheet
• An occupiers obligation to pay rent has to be recognised as a liability
• Service Charge accounts accounted for separately.
• Exemptions for leases of 1 year or shorter.

Question 17

What is an important accountancy change which has an impact on how occupiers regard their property liabilities?

Answer 17

International Financing Report Standards
(IFRS 16)

Question 18

Who is affected by an IFRS 16 and why has it been adopted?

Answer 18

IFRS 16 Leases is a new accounting standard

• It impacts both lessees and lessors.
• It has been adopted to increase transparency and comparability in financial reporting, particularly for lease arrangements

Question 19

What is the difference between a management account and a statutory account?

Answer 19

Statutory accounts (company’s annual accounts) are a set of financial reports prepared at the end of each financial year (shared with shareholders, Companies House etc)

Management accounts are financial reports produced monthly or quarterly (for internal use only) showing current performance allowing management to make decisions and future planning.

Question 20

What is included in a statutory and management account?

Answer 20

-Balance sheet
-P&L statement

Question 21

What is the purpose of a balance sheet?

Answer 21

The purpose of a balance sheet is to give interested parties an idea of the company’s financial position, in addition to displaying what the company owns and owes

Question 22

What are the key financial statements that all companies must
provide?

Answer 22

Profit and loss
account, balance sheet and cash flow statement.

Question 23

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

Answer 23

A profit and loss account shows the incomes and expenditures of a company and the
resulting profit or loss

The balance sheet shows what a company owns (assets) and
what it owes (liabilities) at a given point in time

Question 24

What is a cashflow statement?

Answer 24

It is the summary of the actual or anticipated ingoing and outgoing of cash in a firm
over the accounting period.

It measures the short term ability of a firm to pay off its bills.

Question 25

Why do chartered surveyors need to understand and be able
to interpret company accounts?

Answer 25

To determine if a tenant is able to pay rent

Question 26

What is the difference between debtors and creditors?

Answer 26

Creditors - Your firm owes another firm money

Debtors - A firm who owes your firm money

Question 27

How do you analyse company’s accounts?

Answer 27

Request a Credit Safe Report used by my company (requested
by internal colleague).

Question 28

What is a D&B report?

Answer 28

Dun & Bradstreet Business Credit Report

Measures the creditworthiness of a company.

Question 29

How would you know if a company had a low credit score?

Answer 29

• Low credit rating.

Question 30

Can you tell me about a time you have used company accounts in your work and when you might use this in the future?

Answer 30

A tenant requested an assignment to a partner company and to ensure the company had a sufficient credit score (no less than the current) I liaised with an account to understand and compare the position.