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pm - summary of experience - apc > Accounting Principles - Summary of Experience > Flashcards

Accounting Principles - Summary of Experience Flashcards

1
Q

What is a balance sheet?

A

also called the statement of financial position
- Tells us how much a company is worth, outlining their assets and liabilities and shareholder quity

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2
Q

What is a cash flow statement?

A

Also called the statement of cash flows
- Provides data regarding all cash flows recceived from ongoing opertions and investments

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2
Q

What is a cash flow statement?

A

Also called the statement of cash flows
- Provides data regarding all cash flows recceived from ongoing opertions and investments

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3
Q

What is a profit and loss account?

A

Also known as the income statement
- Summarises the revenues, costs and expenses incurred during a specific period of time

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4
Q

How have you advised on tenants covenant strength?

A

In an application to assign at Farringdon Point
- I reviewed their balance sheet and income statement
- I also instructed Cliant Account financial review and credit report
- Proposed tenant was weaker covenant stregth so i advised AGA and additional 6-month Rent Deposit

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5
Q

What is IFRS and what did it replace?

A

International Financial Reporting Standards -> mandatory accounting standard for group companies

-> Replaced IAS (Internationaly Accounting Standards) in 2001

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6
Q

What is IFRS 16?

A

International accounting model that specifies how leases are recognised in financial statements

  • Requires leases to be recorded as assets and liabilities on the balance sheet
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7
Q

What is the objective of IFRS 16?

A

Assess the effect that leases have on financial position, financial performance and cash flows of an entity

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8
Q

WHat is the result of IFRS 16?

A
  • increase in assets, liabilities and net debt
  • affects key financial ratios, impacting attractiveness and ability to raise finance
  • may result in shorter leases being taken to reduce net debt
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9
Q

What is UK GAAP?

A

UK Generally Accepted Accounting Practice

  • Body of regulation establishing how company accounts must be prepard in the UK
  • FRS 102 is the principle standard used in UK GAAP
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10
Q

What is the difference between UK GAAP and IFRS?

A

The UK GAAP standard, FRS 102, is based on IFRS but for SMEs (small and medium sized enterprises)

  • A simplfied IFRS standard which is more cost-effective
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11
Q

How do you know which accounting standard to use ?

A

Set out in FRS 100 - Application of FInancial Reporting Requirements

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12
Q

What do you understand about GAAP and what is its purpose?

A

Standards that encompass the details, complexities and legalities of business accounting

  • Improve the clarity of communication of financial information
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13
Q

What are the principles of GAAP?

A

Regularity
Consistency
Sincerity
Permanence
Non-compensation
Prudence
Continuity
Periodicity
Materiality
Good faith

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14
Q

What is IFRS 13?

A

Defines fair value, sets out framework for measuring fair value and requires disclosures about fair value measurements

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15
Q

What is the basis of value under IFRS 13?

A

Fair value

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16
Q

what changed in relation to IFRS 16?

A

Removed classification of leases as either opoerating or finance leases

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17
Q

When did IFRS 16 changes come into effect?

A

1st january 2019

18
Q

How do you asses tenants covenant strength?

A
  • Review Companies House documents
  • Request additional financial info
  • Instruct credit report
  • Instruct financial review
  • Profits method (net profit =3x annual rent - rule of thumb roughly)
19
Q

What are the main credit rating agencies

A
  • Dunn and Bradstreet (D&B)
  • creditsafe
  • Standard and Poor (S&P)
  • Moodys
  • Fitch ratings
20
Q

Why is a financial review important

A

As i am not competant enough to provide a strong recommendation alone
-> financial review therefore assist with determining covenant strength and enables me to make strong recommendations

21
Q

What are the 3 types of financial statements you might come across

A
  • balance sheet (statement of financial position)
  • Income statement (profit and loss statement)
  • Cash flow statement (statement of cash flow)
22
Q

What is the difference between management accounts and financial accounts?

A

management accounts are prepared for internal use

  • Financial accounts are required by law / legislation and must follow pre-determined format
23
Q

What are assets on the balance sheet?

A

Something a company owns that has economic alue
i.e cash or real estate

24
Q

What are liabilities on the balance sheet?

A

What a company owes to other parties
i.e Salaries/ wages
Taxes
Interest
Payments owed to suppliers

25
Q

What key information can be concluded from a balance sheet?

A

Their financial position - whether they are solvent

  • How likely it is that a company will still be in business in a year
26
Q

What are th 3 parts of a balance sheet?

A

Assets
liabilities
Owners equity

27
Q

What is the difference between a profit and loss statement and a balance sheet?

A
  • Balance sheet reports assets, liabilities and shareholder equity
  • Profit & Loss statement summarises a companys revenues, costs and expenses
28
Q

Why is good financial record keeping important to you?

A
  • Makes budgetting easier
  • Important for tax purposes
  • Prevents fraud and theft
  • Helps to efficiently manage cash flow
  • Makes management easier
29
Q

Why is the cash flow statement believed to be the most intuitive of all financial statement?

A

Follows the cash made by a business in 3 ways:

  • Operations
  • Investment
  • Financing
    = Sum of these = net cash flow
30
Q

What is directors renumeration in a profit and loss account?

A

Refers to how directors of a company are compensated for their services, usually fees, salary, use of company property and benefits

31
Q

Can you tell me about a common financial measure?

A
  • Gross profit margin / net profit margin
  • Working capital (current assets minus current liabilities)
  • Debt-toequit ratio (total debt / total equity)
32
Q

What is a completion statement ?

A

Statement that outlines the financial transactions incoming and outgoing

33
Q

What is a pre-list?

A

Schedule outlining charges that are to be raised

34
Q

How do you reconcile a SC account?

A

checking all invoices are correct and allocated/apportioned to the correct schedules / expenditure provisions

  • Make adjustments where necessary
  • Within 4 months of accounting end period
35
Q

What guidance is there on SC?

A

RICS Service Charge in Commercial Property 2018

36
Q

When does a reconciliation and budget need to be completed?

A

Budget - Minimum 1 month, issed with apportionment matrix and explanatory comments

Reconciliation - within 4 months, issued with apportionment matrix and explanatory comments

37
Q

What is the Companies Act 2006?

A

Act of Parliament of the UK, forms the primary source of UK company law

  • aims to modernise and simplify corporate law
38
Q

How do you report to your clients on rent and SC collection?

A
  • Weekly meetings following quarter days
  • Run reports
  • Keep them updated by email throughout the week
39
Q

How do you ensure that demands are correct?

A

Check and approve pre-list by looking at Horizon or lease and SC budgets

40
Q

How do you verify completion statements?

A

i don’t, they need to be verified by the Client Accountant

41
Q

When are completion statements needed?

A

Various situations:
- Property sale
- Lease surrender
- Lease renewal
- Rent review (back dated)

42
Q

What are your rent collection KPIs?

A

90% collection on day 7
95% collection on day 14
98% collection on day 28

pm - summary of experience - apc (16 decks)

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