Accounting Principles and Procedures

Question 1

What is a balance sheet?

Answer 1

Statement of a business’s financial position showing its assets and liabilities at a given date, usually at the end of a financial year.

Question 2

What is the formula for a balance sheet?

Answer 2

ASSETS - LIABILITIES = SAREHOLDERS EQUITY (NAV)

Question 3

Give me an example of an asset.

Answer 3

Cash, property, debtors, other investments held

Question 4

Give me an example of a liability.

Answer 4

Borrowings, overdrafts, loans, creditors

Question 5

What is a P&L statement?

Answer 5

Summary of a business’s income and expenditure over a period of time.
Usually prepared on an annual basis.

Question 6

What is the formula for a P&L statement?

Answer 6

REVENUES - EXPENSES = NET INCOME (Profit / Loss)

Question 7

What is the accrual basis?

Answer 7

Revenue recorded when earned / expenditure recorded when incurred.

Question 8

What is the difference between capital and revenue expenditure?

Answer 8

Capital expenditure - cost spent to purchase or improve an asset
Revenue expenditure is day to day running costs

Question 9

What is a cash flow statement?

Answer 9

Shows cash position at the beginning and end.

Actual receipts and expenditure (including VAT) over a period of time.

Question 10

Are cash flow statements included in annual accounts?

Answer 10

It depends

Question 11

What do you mean by the profits test?

Answer 11

Net Profit > 3 x rent for 3 consecutive years

Question 12

What is a usual amount for a rent deposit?

Answer 12

3 - 6 months

Question 13

What is the contents of a set of PLC accounts?

Answer 13

1. Chairman’s statement
2. Independent auditor’s report
3. Income statement (P&L account)
4. Balance Sheet
5. Corporate governance report
6. Remuneration report
7. Other statutory info

Question 14

How are audited accounts different from management accounts?

Answer 14

Audited accounts are prepared by a Chartered or Certified accountant whereas management accounts are for internal purposes only and are prepared by the management team - not audited.

Question 15

What do Experian Credit Reports tell you?

Answer 15

They provide a Commercial Delphi Score which gives an idea of a tenants creditworthiness and likelihood of failure over the next 12 months.

Question 16

What are the Experian Ratings?

Answer 16

0-1	Recent winding up petition or intention to dissolve
2-15	Maximum risk
16-25	High risk
26-50	Above average risk
51-80	Below average risk
81-90	Low risk
91-100	Very low risk.

Question 17

What does Experian’s Commercial Delphi Score take into consideration?

Answer 17

Assesses directors’ track record, consumer track record, financial records and payment performance

Question 18

What is IFRS 16?

Answer 18

New lease accounting standard which all UK public companies will have to comply with when reporting under IFRS
• Will have an impact on how occupiers regard their property liabilities
- Full cost of leases will have to be accounted for on balance sheet
- Will lead to an increase in both assets and liabilities (obligation to pay rent)
- S/C payments accounted separately

Question 19

What is UK GAAP?

Answer 19

The UK Generally Accepted Accounting Principles – replaced by the Financial Reporting Standards (FRS)

Question 20

What is FRS 102?

Answer 20

Accounts must be prepared under FRS 102 for accounting periods beginning after Jan -15 – Fair Value used

Question 21

Are there any exemptions to IFRS 16?

Answer 21

Yes - leases of 12 months or less.