Accounting Principles & Procedures

Question 1

What do the contents of a set of public limited company accounts include?

Answer 1

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

Question 2

What is a balance sheet?

Answer 2

A balance sheet is a statement of the business’s financial position showing its assets and liabilities at a given date, usually at the end of a financial year

Question 3

Can you name some examples of assets?

Answer 3

Assets can include cash, property, debtors and other investment held

Question 4

Can you name some examples of liabilities?

Answer 4

Liabilities can include borrowings, overdrafts, loans and creditors

Question 5

What is a profit and loss account (income statement)?

Answer 5

It is a summary of the business’s income and expenditure transactions, prepared usually on an annual basis

Question 6

What are management accounts?

Answer 6

They are prepared for internal use by a business and are not audited

Question 7

Who are audited accounts prepared by?

Answer 7

Chartered or Certified Accountant

Question 8

What is International Financial Reporting Standards 16?

Answer 8

• This is the lease accounting standard with which all companies have to comply when using the International Financial Reporting Standards in respect of reporting property liabilities
• The full cost of leases has to be accounted for on the balance sheet
• Exemptions exist for leases of 12 months or shorter

Question 9

What standards are you aware of?

Answer 9

• IFRS - set common rules so that all financial statements are consistent, transparent and comparable around the world
• UK GAAP (Generally Accepted Accounting Practice) - set by financial reporting council (the body of accounting standards for UK) based on IFRS

Question 10

What is a company account?

Answer 10

Prepared for external stakeholders and required by law for all limited companies in the UK, follow a standardised format and are audited

Question 11

What is the role of an auditor?

Answer 11

Auditors role is to review and verify the accuracy of financial records and ensure compliance with accounting standards and laws, ensuring that financial statements present a “true and fair” view

Question 12

What is a covenant strength?

Answer 12

Refers to a tenant’s ability to fulfill their obligations under a lease, particularly their ability to pay rent and maintain the property

Question 13

What are the steps to assess a covenant strength of a tenant?

Answer 13

1. Obtain tenant information
2. Use CreditSafe platform to request a credit report and conduct ID and KYC checks
3. Review outcome of the report

Question 14

What are CreditSafe checks?

Answer 14

• Provides a credit report that assesses a tenant’s credit history, including payment history and debts
• Ensures the tenant is who they claim to be
• Produces a credit rating for that company