Accounting Principles & Procedures

Question 1

What is a public limited company?

Answer 1

Lendlease: Owned by shareholders, managed by directors

Question 2

What should a set of a public company accounts include?

Answer 2

• Chairman’s statement
• Independent auditor’s report
• Income statement (profit and loss account)
• Statement of financial position (balance sheet)
• Corporate governance report
• Remuneration report
• Other statutory information

Question 3

What is a balance sheet?

Answer 3

• Shows assets and liabilities at a given date
• Assets include cash, property, debtors
• Liabilities include borrowings, overdrafts, loans and creditors

Question 4

What is a profit and loss statement?

Answer 4

• Firm’s income and expenditure transactions
• Cash flow statement shows all the receipts and expenditure to include VAT
• Management accounts are for internal use
• Audited accounts are for external use

Question 5

What is IFRS 16?

Answer 5

• A new lease standard
• Most firm’s have a lease for their office so will be affected
• Full cost of lease should be on balance sheet as a liability
• Came into effect January 2019
• Exempt if lease is under 12 months

Question 6

What are the IFRS?

Answer 6

• Founded in 2001
• Introduced a global language for financial statements

Question 7

Example of how you handle accounts in your role?

Answer 7

Oracle

• Provide PO number for invoice
• Receive invoice and send to account’s team who raise it on the system
• Receipt it on the system

Question 8

Another example of how you handle accounts in your role?

Answer 8

Managing budgets

• Set budget
• Cash flow out
• Record expenditure
• Review regularly to ensure not exceeding
• Record transactions

Question 9

How do Lendlease prepare their company accounts?

Answer 9

• Must deliver accounts every year to Companies House, even if the company if dormant
• Non-compliance with this could lead to the UK Government assuming the company no longer undertakes business / is in operation. It could strike it from the register.
• If struck off register, the assets become property of The Crown.

Question 10

What are the legal requirements Lendlease should have to adhere to?

Answer 10

• Profit and loss account
• Balance sheet (signed by director on behalf of the board)
• Not to the accounts
• Group accounts (if appropriate)
• Director’s report signed by secretary or director
• Business review if the company does not qualify as small
• Auditor’s report stating the name of the auditor and signed and dated by them (unless the company is exempt from audit)

Question 11

What are accounting records?

Answer 11

Records that show:

• All money received and spent
• Record of assets and liabilities

Question 12

What if your company deals in stock?

Answer 12

• Records of stock at the end of each financial year
• Record of all goods sold (unless to retail sellers)
• Include buyers and sellers

Question 13

How long must accounting records be kept for?

Answer 13

Private companies must keep accounting records for 3 years from the date they were made

Public companies must keep accounting records for 6 years from the date they were made

Question 14

How can records be kept?

Answer 14

Paper / digital format

Question 15

Do companies have to use professional accountants?

Answer 15

No, can be done themselves
Professional advice will help meet legal requirements

E.g. Institute of Chartered Accountants in England and Wales (ICAEW)

Question 16

What standards are behind accounting theory?

Answer 16

International Financial Reporting Standards (IFRS)

Set of common rules fo that financial statements can be consistent, transparent and comparable

Issued by the International Accounting Standards Board (IASB)

Question 17

Who issues the IFRS?

Answer 17

Issued by the International Accounting Standards Board (IASB)

Question 18

What standards are used in the UK?

Answer 18

UK GAAP

Generally Accepted Accounting Practise

This is the body of accounting standards published by the UK’s Financial Reporting Council (FRC)

Question 19

What is a profit and loss statement?

Answer 19

Summarises revenues and costs and expenses incurred during a fiscal quarter

Question 20

What is gross profit?

Answer 20

Revenue - Cost of Goods Sold / Cost of Service = Gross profit

Question 21

What is net profit / net earnings?

Answer 21

Total Revenue - Total Expenses - Net profit

Question 22

What is financial auditing?

Answer 22

Auditors come in behind accountants and verify their work

Examine the financial statements prepared by accountants and ensure they represent the company’s financial position accurately

Question 23

What companies are exempt from auditing?

Answer 23

Small and micro businesses:

• Annual turnover must not be more than £10.2m
• Balance sheet total must be not more than £5.1m
• Average number of employees must be not more than 50