Accounting principles L1

Question 1

What is an Income statement or profit and loss statement? Or Cash flow statement?

Answer 1

A financial statement that summarizes the revenues, costs, and expenses incurred during a specified period

Question 2

What is a Balance sheet?

Answer 2

A financial statement that reports a company’s assets, liabilities, and shareholder equity at a specific point in time, typically annually

Question 3

What is the Role of auditor?

Answer 3

Charted accounted who examines a company’s financial records

Question 4

What is Tax?

Answer 4

The amount of money or % that is owed to HMRC based on the company profit. normally 20%

Question 5

What is the difference between a Partnership and a limited company?

Answer 5

A partnership is a business structure where two or more individuals jointly own and operate a business, sharing profits and losses, while a limited company is a separate legal entity where ownership is divided into shares held by shareholders, with the company itself being liable for debts, not the individuals involved, meaning they have limited liability

Question 6

What is the difference between a P&L account and a Balance sheet

Answer 6

Balance sheet is a snapshot at a given point in time and a P&L account is showing the income and expenditure of a company over time.

Question 7

What is a profit and loss account?

Answer 7

a Financial document showing a companies net profit or loss over a certain period

Question 8

Why must a Clients money be kept in a separate Client account

Answer 8

In case you go bankrupt, must be separate from the firms money

Question 9

If a Client refuses to pay their fees, can you take it from their client account?

Answer 9

Yes, as you have agreed the ToE and fees to be paid and you have carried out the services.

Question 10

What are the six main areas set out in the RICS Professional statement ‘Client Money Handling 2019’

Answer 10

1. Holding Client Money
2. Providing information to clients
3. Receipts of client money
4. Payments from client accounts
5. Accounting records and controls
6. Compliance

Question 11

What procedures should you take when handling clients money?

Answer 11

• Client account must be kept separate
• The work ‘client’ is on the bank statement
• a client must be able to have their monies on demand
• accurate records are kept with a running balance available
• display procedures document on website

Question 12

What is an example of clients money?

Answer 12

Rent, Holding deposit, service charge

Question 13

What happens if a client refuses to pay a fee?

Answer 13

try to resolve through mediation first. Note Abortive fee in ToE