Accounting Principles L1

Question 1

Why is knowledge of accounting principles important for a chartered surveyor?

Answer 1

• To be able to understand the financial health of your company/organisation so it can be managed effectively
• To understand your own financial health (Rule of Conduct for Members)
• To be able to understand the financial health of a project to protect clients interests

Question 2

What is a profit and loss statement?

Answer 2

Income statement - A statement that shows income and expenditure transactions for a project or company to show what profit is being made or lost, prepared on an annual basis

Question 3

Describe the accountancy change – IFRS 16?

Answer 3

Impacted how occupiers regard their property liabilities – IFRS 16 is a new lease accounting standard with which all companies have to comply from 2019, when using International Financial Reporting Standards.

The full cost of leases will have to be accounted within the balance sheet, and the occupiers obligation to pay rent will have to be recognised as a liability, though service charge would be accounted for separately.

Question 4

What is a cash flow statement?

Answer 4

“Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the Business or project. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company or project, particularly.” (shows all the actual receipts and expenditure and includes VAT)

Question 5

What is a balance sheet

Answer 5

Statement of a business’s financial position, showing the assets, liabilities, and capital of a business or other organisation at a particular point in time, detailing the balance of income and expenditure over the preceding period. This gives an idea as to what the company owns and owes. They may also include shareholders investments as well.”
Assets – cash, property, debtors, and other investments held.
Liabilities – borrowings, overdrafts, loans, and creditors

Question 6

What is the difference between Management accounts and company accounts?

Answer 6

Management accounting provides information to people within an organisation or for a project -Confidential. Prepared for internal use only and not audited. Company accounts are a legal requirement in most countries and provide information for people outside the company (Publicly available information)

Question 7

Describe contents of CJ company accounts

Answer 7

• Carter Jonas Member’s Report – provide overall review of activity
• Carbon Report – provide details on energy emission and energy usage data from May 2019 to May 2020
• Members Responsibility Statement
• Independent auditor’s report by Deloitte LLP
• Consolidated Profit and Loss Statement (income statement – shows turnover, gross profit, operating profit and profit before tax, profit for available discretionary division among members)
• Balance Sheet
• Cash Flow Statement
• Notes to the Financial Statement

Question 8

What were Carter Jonas’ turnover and net profit in 2020.

Answer 8

Turnover - £67,000,000 in 2020 (total income generated in the financial year 2019-2020

Net profit - Net profit is the measurement of a company’s profit once operating costs, taxes, interest and depreciation have all been subtracted from its total revenues - £12.5 million