Accounting Principles - Summary of Experience

Question 1

What is a balance sheet?

Answer 1

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

Question 2

What is a cash flow statement?

Answer 2

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

Question 2

What is a cash flow statement?

Answer 2

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

Question 3

What is a profit and loss account?

Answer 3

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

Question 4

How have you advised on tenants covenant strength?

Answer 4

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

Question 5

What is IFRS and what did it replace?

Answer 5

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

-> Replaced IAS (Internationaly Accounting Standards) in 2001

Question 6

What is IFRS 16?

Answer 6

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

Question 7

What is the objective of IFRS 16?

Answer 7

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

Question 8

WHat is the result of IFRS 16?

Answer 8

• 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

Question 9

What is UK GAAP?

Answer 9

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

Question 10

What is the difference between UK GAAP and IFRS?

Answer 10

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

Question 11

How do you know which accounting standard to use ?

Answer 11

Set out in FRS 100 - Application of FInancial Reporting Requirements

Question 12

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

Answer 12

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

• Improve the clarity of communication of financial information

Question 13

What are the principles of GAAP?

Answer 13

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

Question 14

What is IFRS 13?

Answer 14

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

Question 15

What is the basis of value under IFRS 13?

Answer 15

Fair value

Question 16

what changed in relation to IFRS 16?

Answer 16

Removed classification of leases as either opoerating or finance leases

Question 17

When did IFRS 16 changes come into effect?

Answer 17

1st january 2019

Question 18

How do you asses tenants covenant strength?

Answer 18

• 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)

Question 19

What are the main credit rating agencies

Answer 19

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

Question 20

Why is a financial review important

Answer 20

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

Question 21

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

Answer 21

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

Question 22

What is the difference between management accounts and financial accounts?

Answer 22

management accounts are prepared for internal use

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

Question 23

What are assets on the balance sheet?

Answer 23

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

Question 24

What are liabilities on the balance sheet?

Answer 24

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

Question 25

What key information can be concluded from a balance sheet?

Answer 25

Their financial position - whether they are solvent - How likely it is that a company will still be in business in a year

Question 26

What are th 3 parts of a balance sheet?

Answer 26

Assets liabilities Owners equity

Question 27

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

Answer 27

- Balance sheet reports assets, liabilities and shareholder equity - Profit & Loss statement summarises a companys revenues, costs and expenses

Question 28

Why is good financial record keeping important to you?

Answer 28

- Makes budgetting easier - Important for tax purposes - Prevents fraud and theft - Helps to efficiently manage cash flow - Makes management easier

Question 29

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

Answer 29

Follows the cash made by a business in 3 ways: - Operations - Investment - Financing = Sum of these = net cash flow

Question 30

What is directors renumeration in a profit and loss account?

Answer 30

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

Question 31

Can you tell me about a common financial measure?

Answer 31

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

Question 32

What is a completion statement ?

Answer 32

Statement that outlines the financial transactions incoming and outgoing

Question 33

What is a pre-list?

Answer 33

Schedule outlining charges that are to be raised

Question 34

How do you reconcile a SC account?

Answer 34

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

Question 35

What guidance is there on SC?

Answer 35

RICS Service Charge in Commercial Property 2018

Question 36

When does a reconciliation and budget need to be completed?

Answer 36

Budget - Minimum 1 month, issed with apportionment matrix and explanatory comments Reconciliation - within 4 months, issued with apportionment matrix and explanatory comments

Question 37

What is the Companies Act 2006?

Answer 37

Act of Parliament of the UK, forms the primary source of UK company law - aims to modernise and simplify corporate law

Question 38

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

Answer 38

- Weekly meetings following quarter days - Run reports - Keep them updated by email throughout the week

Question 39

How do you ensure that demands are correct?

Answer 39

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

Question 40

How do you verify completion statements?

Answer 40

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

Question 41

When are completion statements needed?

Answer 41

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

Question 42

What are your rent collection KPIs?

Answer 42

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