Accounting Principles and Procedures Flashcards
What is a balance sheet?
Statement of a business’s financial position showing its assets and liabilities at a given date, usually at the end of a financial year.
What is the formula for a balance sheet?
ASSETS - LIABILITIES = SAREHOLDERS EQUITY (NAV)
Give me an example of an asset.
Cash, property, debtors, other investments held
Give me an example of a liability.
Borrowings, overdrafts, loans, creditors
What is a P&L statement?
Summary of a business’s income and expenditure over a period of time.
Usually prepared on an annual basis.
What is the formula for a P&L statement?
REVENUES - EXPENSES = NET INCOME (Profit / Loss)
What is the accrual basis?
Revenue recorded when earned / expenditure recorded when incurred.
What is the difference between capital and revenue expenditure?
Capital expenditure - cost spent to purchase or improve an asset
Revenue expenditure is day to day running costs
What is a cash flow statement?
Shows cash position at the beginning and end.
Actual receipts and expenditure (including VAT) over a period of time.
Are cash flow statements included in annual accounts?
It depends
What do you mean by the profits test?
Net Profit > 3 x rent for 3 consecutive years
What is a usual amount for a rent deposit?
3 - 6 months
What is the contents of a set of PLC accounts?
- Chairman’s statement
- Independent auditor’s report
- Income statement (P&L account)
- Balance Sheet
- Corporate governance report
- Remuneration report
- Other statutory info
How are audited accounts different from management accounts?
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.
What do Experian Credit Reports tell you?
They provide a Commercial Delphi Score which gives an idea of a tenants creditworthiness and likelihood of failure over the next 12 months.
What are the Experian Ratings?
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.
What does Experian’s Commercial Delphi Score take into consideration?
Assesses directors’ track record, consumer track record, financial records and payment performance
What is IFRS 16?
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
What is UK GAAP?
The UK Generally Accepted Accounting Principles – replaced by the Financial Reporting Standards (FRS)
What is FRS 102?
Accounts must be prepared under FRS 102 for accounting periods beginning after Jan -15 – Fair Value used
Are there any exemptions to IFRS 16?
Yes - leases of 12 months or less.
