Accounting Principles and Procedures Flashcards
How do you assess the financial strength of a tenant when reviewing their business plan?
I analyse the tenant’s financial statements, particularly balance sheets and profit and loss accounts, to assess their ability to meet lease obligations.
Can you explain the significance of a tenant’s balance sheet in the context of property leasing?
A tenant’s balance sheet provides insights into their financial health, such as assets, liabilities, and equity, and how this affects their reliability as a tenant.
What role do profit and loss accounts play when evaluating the suitability of a tenant?
Reviewing a tenant’s profit and loss accounts helps assess their profitability and operational performance, which in turn affects their ability to pay rent.
How do you use financial documents like balance sheets and profit and loss accounts to evaluate the potential risks of leasing to a tenant?
Financial documents help identify potential risks, such as low profitability or high liabilities, which could impact the tenant’s ability to meet lease obligations and whether the risk is acceptable to the landlord.
How do you ensure the tenant’s business plan aligns with their financial strength and lease requirements?
Compare the tenant’s business plan with their financial statements to ensure they can afford the lease terms and the lease doesn’t overextend their financial capacity.
Can you explain how performance measurement is used to monitor the success of a department within a business?
Performance measurement is done by comparing actual results to budgeted figures.
How do you ensure that departmental budgets align with overall company objectives?
To ensure departmental budgets align with company objectives, I first review the strategic goals and financial targets set by senior management. I then work with departmental heads to set realistic budget allocations that reflect these goals.
What is the significance of the Companies Act 2006 in financial reporting?
An Act to simplify administration and to improve the rights of shareholders.
To update and simply corporate law.
Answer: It can be found on the government website, an act to simplify administrations stipulating the duty and obligations of companies to release accounting records under Part 15 Chapter 1-12.
What are the main challenges when managing departmental budgets, and how do you overcome them?
One common challenge is unexpected changes in revenue or costs, which can cause budget variances.
What are the RICS requirements for client accounts?
Hold client money in a controlled, authorised client account.
Client Money Account – Funds must be held in a designated client account, separate from business funds.
Identification – Accounts must be clearly labelled as holding client money.
Client Consent – Written agreement on how funds are handled.
Record Keeping – Accurate, up-to-date records of all transactions.
Reconciliation – Regular bank reconciliations to ensure accuracy.
Interest Handling – Clear policies on whether interest is retained or paid to clients.
Protection – Adequate safeguards, including insurance and controls against fraud.
Prompt Payments – Client money must be transferred or used as agreed.
Audit Compliance – Annual reviews and independent audits where required.
what is a profit and loss account?
A Profit and Loss Account (P&L) is a financial statement that summarises a company’s revenues, costs, and expenses over a specific period. It shows whether a business made a profit or loss by calculating:
Revenue – Expenses = Profit/Loss
It typically includes:
Turnover (Revenue) – Sales income
Cost of Sales – Direct costs of goods/services
Gross Profit – Revenue minus cost of sales
Operating Expenses – Rent, wages, utilities, etc.
Operating Profit – Gross profit minus operating expenses
Net Profit (or Loss) – After taxes and other deductions
what is a Balance sheet in uk accounting?
A Balance Sheet in UK accounting is a financial statement that shows a company’s financial position at a specific date. It follows the formula:
Assets = Liabilities + Equity
Key Sections:
Assets – What the business owns (e.g., cash, inventory, property).
Liabilities – What the business owes (e.g., loans, creditors, taxes).
Equity – Owner’s interest (e.g., retained earnings, share capital).
It helps assess financial health, liquidity, and solvency.
What is a cash flow statement?
A Cash Flow refers to the movement of money into and out of a business over a period. It is recorded in a Cash Flow Statement
What’s included within your departments budget?
Salaries
expenses
software etc
Important to keep a business financially secure.
Important to look at historical data
What is the RICS Client Money Handling, 1st edition (PS)
A professional standard providing clear rules for RICS members and regulated firms to have the appropriate controls and procedures to keep client money safe.
Arnolds Keys are part of the client money protection scheme
what is the RICS Client Money Protection Scheme?
The scheme provides protection, as a last resort, in instances where an RICS Regulated firm is unable to repay a client’s money, up to the limits and exceptions set out in the scheme rules.
What is UK GAAP?
UK GAAP refers to the accounting standards, principles, and regulations governing financial reporting in the UK.
It ensures consistency, transparency, and compliance with legal and regulatory requirements, aligning with Companies Act 2006 and Financial Reporting Council (FRC) guidelines.
What is insolvency?
The inability to pay off your creditors who have lent you money.
What is liquidation?
When company assets must be sold off to pay creditors and distribute remaining funds to shareholders/partners.
