Accounting Principles & Procedure

Question 1

What is a balance sheet?

Answer 1

Shows the businesses financial position by its assets and liabilites on a given date

Question 2

What contents would you see in a PLC account?

Answer 2

Chairmens statement
Independent auditors report
Profit and loss account
Balance sheet
Corporate governance report
Remuneration report
Other statutory information

Question 3

What does a profit and loss account show you?

Answer 3

A summary of business income and their expenditures, usually prepared on an annual basis

Question 4

What is a managment account?

Answer 4

Prepared for by the
business for internal purposes

Question 5

What is an audited/financial account?

Answer 5

Prepared for by chartered accountants

Question 6

What is IFRS 16

Answer 6

Lease requirement to include leases greater than 12 months as a liability on the balance sheet

Question 7

What do you know about IRFS 16

Answer 7

Rent paid by occupiers must be recognised as a liability

Question 8

Are service charges included in IRFS 16?

Answer 8

No, they are accounted for separately

Question 9

What are a consolidated set of accounts?

Answer 9

A number of indovidual subsidary accounts for a company within a single set of accounts

Question 10

What is the role of an auditor?

Answer 10

Ensuring that all information on a financial statement is accurate.
RICS firms are required to have external audits

Question 11

What is EBITDA

Answer 11

Earnings Before Interest, Taxes, Depreciation and Amortisation

Question 12

What are the key financial statements that all firms must provide?

Answer 12

Profit and loss accounts, balance sheets and cash flow

Question 13

What is the difference between a statement of comprehensive income and a statement of financial position?

Answer 13

A statement of comprehensive income: shows income, expenditure and profit or loss of the company
A statement of financial position: shows what a company owns (assets) and what it owes (liabilities) at a given point in time

Question 14

What are the main types of ratio analysis used to assess a company’s financial strength?

Answer 14

• Liquidity (solvency)
• Investment/shareholders
• Gearing
• Profitability
• Financial

Question 15

Why do chartered surveyors need to understand and be able to interpret company accounts?

Answer 15

• For assessing teh covenant strength of potential tenants and landlords
• For profits-method valuations
• For assessing competiton.