Accounting principles and procedures Flashcards
What are Generally Accepted Accounting Principles (GAAP)?
- RICS registered firms must comply.
- Std set of financial report rules = consistent, comparable financial statements = informed decisions.
- Includes asset valuation
Key differences between GAAP and the International Financial Reporting Standards
- GAAP is rules based / IFRS is principle based
- specific guidance vs more professional judgement
- Differences in asset revaluation, development costs and cashflow / balance sheet presentation
Whats the role of the auditor?
- Ensuring reliability and transparency
- Review financial statement and provide opinion
Whats the Companies Act 2006.?
- Governs the formation, operation, and dissolution of companies in the UK
- Simplify / modernise how they operate
- Easier to establish and register a company
- Shareholders hold more rights
What are the financial statements used to assess a business?
- Balance Sheet – assets, liabilities and equity (at a certain time)
- Profit and Loss statement – revenues, expenses and P&L over a period
- Cash Flow Statement – operating activities, returns on investments, taxation, capital expenditure, financing short term viability of a business and its ability to pay bills (liquidity)
What is Dun & Bradstreet?
- Company financials, credit history etc. Assess risk and make decisions.
- D-U-N-S Number for each business.
How do you review the financial viability of tenderers?
- Review & analyse financial reports; level of profitability, liquidity, solvency.
- Credit Check
- Insurnaces
- Claims against them in the last 3 years.
What do you look for when analysing consultant fee proposals?
- Total Fee & how this was calculated
- Level of resources; seniority, experience and availability
- Fee drawdown
- Terms & Conditions
- Scope of Services
- Exclusions
- Assumptions e.g. programme
Whats the context of a business plan?
- A document used to gain funding for a business / project.
- Captures reasons for initiating a business / project
What’re the Contents of a business plan?
- Create a description of the business.
- Identify stakeholders & their needs.
- Analyse existing strategy if applicable.
- Carry out SWOT analysis (Strengths, Weaknesses, Opportunities, Threats).7
- Carry out PEST analysis (Political, Economical, Social, Technological).
- Identify SMART goals (Specific, Measurable, Attainable, Relevant, Time Bound).
- Marketing strategy – market research, promotion, identify target audience, potential stakeholders.
- Organise appropriate resources – funding / staff.
- Implement the strategy.
- Review KPIs – identify areas for development / improvement / growth.
- Monitor & review progress on a regular basis.
What’re the types of business plan?
- Strategic - high-level, long-term plan that outlines the overall direction and goals of the firm
- Departmental - particular department or functional area within the organization (e.g., marketing, sales, finance, operations).
- Operational - specific actions, resources, and timelines required to execute the strategic plan
- Corporate - strategic direction of the entire corporate entity
What are the methods for financial benchmarking?
- Used to compare performance
- Profitability Ratios (gross or net profit margin / Return on Equity)
- Liquidity Ratios –
- Trend Analysis – compares data over peiods - % change in financial statement line items.
- Industry Benchmarking – compare to others
Define working capital
difference between a company’s current assets and its current liabilities.
Define Stock
goods that a company holds for sale to its customers
Define Debtors (accounts receivable)?
is the amounts of money that customers owe to a company
Define Creditors (Accounts Payable)
the amounts of money that a company owes to its suppliers or other parties
Define payback
Time it takes for inflows from capital investment to equal initial cash outflows.
