Accounting Principles Flashcards
(23 cards)
What are the key financial statements that companies provide?`
- Profit and Loss
- Balance Sheets
- Cash Flow Statements
Whare is the difference between management and financial accounts?
Management accounts are for the internal review of the management team.
Financial accounts are the company accounts required by UK Law.
What is a profit and loss account?
Shows income and expenditure of a company and the resulting profit and loss.
What is a balance sheet?
Shows what a company owns, such as assets, and what it owes, such as it’s liabilities at a given point in time.
What is a cashflow statement?
Summary of actual anticipated ingoing and outgoing of cash over a accounting period.
What can a cashflow statement be used for?
To measure the short term ability of a firm to pay off it’s bills.
What are Capital Allowances?
Tax relief on certain items purchased for the business, such as tools and equipment.
What are Sinking Funds?
Funds that are set aside for future expense or long term debt.
What is insolvency?
The inability to pay off a debt where liabilities exceed assets.
What is Companies House?
An agency that incorporates and dissolves limited companies within the United Kingdom.
What does HMRC stand for?
His Majesties Revenue and Customs.
Why do Chartered QS’s need to understand and interpret company accounts?
To aid in preparing their own business accounts.
Assessing the financial strength of contractors and tendering contractors.
What is an S-Curve?
An S-Curve, or standard curve, refers to the shape of the expenditure profile in a graphical form.
How is an S-Cure used by a quantity surveyor?
To compare actual progress of works on site against pre-construction predictions.
What is an Escrow Account?
A separate account owned by a trusted third party.
Why would you use an Escrow Account?
Can be used a project bank account for the release of funds.
When have I used company accounts in my work?
To assess the financial strength of contractors at PQQ stage.
How do you analyse a companies accounts?
I would not do this, I will always request the client carry out their own detailed analysis.
Why would I not recommend the appointment of a contractor with a low credit rating?
Increased risk of a contractor not performing satisfactorily by being unable to provide sufficient resource or materials.
It may also increase the contractors risk of insolvency.
What measures would I take if my client wanted to explore the option of appointing a contractor with low credit rating?
I would suggest that a Performance Bond be put in place.
I would ensure the tender return is not front loaded.
I would ensure that interim valuations are not overclaimed and are accurate.
What is a Performance Bond?
A guarantee provided by a third party to ensure a contractor fulfils their contractual obligations.
If these obligations are not met by the contractor, then the Performance Bond is called upon to compensate the client for financial loss.
What is front loading?
Where a contractor will inflate the costs at the beginning of a project to gain an influx of cash.
How can you tell when a contractor is front loading?
Abnormally high costs at the beginning of a project.
