#039 Accounting principles and procedures 🧾
Hi folks 👋🏾
It’s been a long stint but I have now covered the Technical and Optional competencies. From this post onwards I will be going through the Mandatory competencies.
I would highly advise you to go through the candidate guide and the QS pathway guide to understand the basic requirements.
Here is a list of all Mandatory competencies:
- Accounting principles and procedures
- Business planning
- Conflict avoidance, management and dispute resolution procedures
- Data management
- Diversity, inclusion and teamworking
- Inclusive environments
- Client care
- Communication and negotiation
- Health and safety
- Ethics, Rules of Conduct and professionalism
We will start with the level 1 competencies and then move on from there!
DISCLAIMER: The following is not an exhaustive set of notes, but it's an attempt to help those who, like me at the beginning, did not know where to start! Please feel free to let me know if I have said anything incorrect or out of date!
So what are Level 1 Accounting principles and procedures all about?
The RICS note that to demonstrate competence at Level 1, you need to demonstrate your ability to:
Demonstrate knowledge and understanding of accounting concepts and the format and preparation of management and company accounts, including profit and loss statements, cash flow statements and balance sheets.
The Generally Accepted Accounting Principles (GAAP) relevant to the candidate’s geographical area of experience and how property is treated in an entity’s accounts
GAAP is the body of accounting standards published by the UK’s Financial Reporting Council (FRC). Depending on where you live, accounting standards will be regulated by a different authority, e.g. in the USA, it is the Financial Accounting Standards Board (FASB).
They are a set of rules which regulate how accounts are prepared.
According to the RICS (see p.13):
Assets (i.e. property, plant and equipment) included in financial statements prepared in accordance with UK GAAP are measured on the basis either of the cost model, the revaluation model, or the fair value model as defined in FRS 102.
Each of the models noted above have extended definitions which describe how the assets are presented. Click here to learn more!
International Accounting Standards (IAS), broadly how IAS vary from National GAAP and how property is treated in an entity’s accounts prepared under IAS
The main difference between IAS and GAAP is that IAS is a principle-based accounting method while GAAP is a rules-based accounting method. IAS is practiced by over 120 countries to deliver accounting statements. Please note, International Accounting Standard (IAS) and International Financial Reporting Standard (IFRS) are the same. The difference between them is that IAS represents the old accounting standard!
Under IFRS, the standard allows the company to choose between holding the investment property at depreciated cost or at fair value with changes recognised in the profit or loss. Whereas under FRS 102 (GAAP), investment property must be measured at fair value if it can be reliably determined.
An entity’s financial results and basic accounting principles including balance sheets, profit and loss, and cash flow statements
Use this link to learn more about reading financial statements!
The role of the auditor
An auditor is a person whose job is to make sure that information reported on financial statements is true and accurate and that the financial statements are prepared according to the relevant standards (GAAP, IAS etc.).
Hope the above makes sense, if you have any questions please drop a comment below!