Contract Administration and Property Management

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Table of Contents

Executive Summary
Profit and loss account 2007, 2008
Balance Sheet
Notes for the balance Sheet
Reference List

Executive Summary

To begin with, it should be stated that property management companies are engaged in the sphere of managing the issues associated with movable and immovable property, legislative, social, and commercial factors of its ownership. Originally, it is often emphasized that there are numerous aspects of this engagement, which entail managing the accounts and finances of the real estate. An integral part of the activity entails participating in litigation processes with owners, dealers and insurance agencies. Litigation, in its turn, which is regarded to be the integral part of property management is not within the main operating activities of the company as these issues are regarded to be the separate function, set aside for highly qualified attorneys.

Following the research by Solomons (2005, p. 301), the following statement should be emphasized:

Special attention is given to landlord/tenant law and most commonly evictions, non-payment, harassment, reduction of pre-arranged services, and public nuisance are legal subjects that gain the most amount of attention from property managers. Therefore, it is a necessity that a property manager is current with applicable municipal, county and state laws and practices.

In the light of this fact, it should be stated that the responsibility level of the director is high enough, as the property managers have a wide range of responsibilities and possible assignments. Consequently, the director of the company is responsible for the financial, legislative, social, marketing, and surely managerial activity of the company.

As for the matters of financial activity, it should be emphasized that the data, provided for the analysis will be analyzed from the perspective of structural analysis of the financial information, and will entail the following parts:

Profit and Loss Account for 2007 & 2008
A Balance Sheet for 2007 & 2008
Appropriate Notes to the Accounts

The results of the financial activity of the company are included in the balance sheet, and the statement of revenue and expenditure.

Profit and loss account 2007, 2008

The profit of the company is made from selling the consultancy services to those who require it, performing the described operations and winning sues against property owners, insurance agencies, etc.

In accordance with the financial statement, the profits and losses of the company will be counted on the basis of the following data

Year	2008	2007
Income: service charges	8280	7200
Income	8280	7200
Management fees	2009	1502
Property Maintenance	1386	3526
Window cleaning	682	820
Accountancy	250	250
Gardens	1335	1780
Sundry expenses	–	35
Insurance	1051	1169
Bank charges	129	125
Postage, printing, stationery	101	110
Expenditure	6943	9317
Balance being excess of income over expenditure	1337	(2117)

The total profit will be 1337 for 2008, and 2117 of losses in 2007.

As for the matters of taxation, it is stated that Corporation Tax is not payable on residual profit as the company is a mutual company.

Balance Sheet

First of all, it should be stated that balance sheet is the financial statement that is aimed to prove the summary of company’s assets, liabilities and shareholders’ equity at a particular period of time. Often the balance sheets represent a snapshot of the financial activity of any company. Originally, it gives any company the information about the possessions and debts of the company, and how much is invested into this company.

In accordance with the accounting practices, the balance sheet is counted using the following formula:

Assets = Liabilities + Shareholders’ Equity

In the light of this fact, there is strong necessity to mention that the assets, which are generally represented in these calculations are regarded as the means, used to operate the company, and aimed to the balanced financial obligations of the company along with the equity investment, which is brought into the financial system of the company and the retained earnings. In accordance with Van Riper (2004, p. 541) the following statement should be emphasized:

Assets are what a company uses to operate its business, while its liabilities and equity are two sources that support these assets. Owners’ equity, referred to as shareholders’ equity in a publicly-traded company, is the amount of money initially invested into the company plus any retained earnings, and it represents a source of funding for the business.

Thus, in accordance with the stated rules and principles, the balance sheet for the company will be the following

Item	2008	2007
Bank interest received	71	42
Debtors	816	1287
Current account	4435	2959
Deposit account	27	26
Accountancy costs	250	250
Accruals	1103	1100

Assets

Current Assets
Cash in bank	$ 129	$ 125
Accounts receivable	8280	7200
Inventory	1 386	3526
Prepaid expenses	2 146	4 076
Other current assets	–	–
Total Current Assets	$ 11 941	$ 14 927

Machinery & equipment	1 386	3526
Furniture & fixtures	–	–
Leasehold improvements	–	–
Land & buildings	1335	1780
Other fixed assets	–	–
(LESS accumulated depreciation on all fixed assets)	(101)	110
Total Fixed Assets (net of depreciation)	$ 2 620	$ 5 416

Intangibles	$ 887	$ 920
Deposits	27	26
Goodwill	–	–
Other	–	–
Total Other Assets	$ 914	$ 946

TOTAL Assets	$ 15 475	$ 21 289

Current Liabilities
Accounts payable	$ 250	$ 250
Interest payable	816	1 287
Taxes payable	–	–
Notes, short-term (due within 12 months)	–	–
Current part, long-term debt	–	–
Other current liabilities	–	–
Total Current Liabilities	$ 1 066	$ 1 537

Long-term Debt
Bank loans payable	$ 1 103	$ 1 100
Notes payable to stockholders	–	–
LESS: Short-term portion	–	–
Other long term debt	–	–
Total Long-term Debt	$ 1 103	$ 1 100

Total Liabilities	$ 2 169	$ 2 637

Owners’ Equity
Invested capital	$ 1 051	1169
Retained earnings – beginning	129	125
Retained earnings – current	157	144
Total Owners’ Equity	$ 1 337	$ 1 438

Total Liabilities & Equity	$ 3 506	$ 4 075

Notes for the balance Sheet

As for the calculations, and the notes on the matters of the balance sheet, it should be stated that the data which was obtained was processed in accordance with the principles of the generally accepted accounting practice. Thus, the shareholder’s equity may be regarded as the net worth of the company. Originally, as it is stated in Ryan et. al.(2006) it represents stakeholders’ claim to business benefits after all creditors and debts have been paid in accordance with the accounting documentation and financial agreements of the company. As Mitschow (2003, p. 109) emphasizes: “Shareholder equity is also referred to as Owner’s or Stockholders’ Equity. It can be calculated by taking the total assets and subtracting the total liabilities”.

The assets, which are calculated, originate from the shareholder’s equity and incorporate the sources of this equity, which generally take its origin from the finances, which are invested in the company, along with the additional investments. The second source of this equity originates from retained incomes, which the company is capable to amass over time by the means of its financial activity. As Mitschow (2003, p. 224) emphasizes: “In most cases, the retained earnings portion is the largest component.” As for the balance sheet in general, it is often stated that all the components and segments of this sheet will have numerous accounts within the segments of the sheet itself. The document itself has its own value as well as the rules of accounting. Thus, such accounts, as cash, inventory, property, insurance, fixed assets, and others represent the positive side of the sheet, while accounts payable and other liabilities are regarded as the negative side. As Ryan et al (2006, p. 561) emphasize: “The exact accounts on a balance sheet will differ by company and by industry, as there is no one set template that accurately accommodates for the differences between different types of businesses”.

Reference List

Mitschow, M. C. 2003. William R. Scott, Financial Accounting Theory. Issues in Accounting Education, 18(4), 463.

Ryan, S. G., Herz, R. H., Iannaconi, T. E., Maines, L. A., Palepu, K., Schrand, C. M., et al. 2006. Evaluation of the FASB’s Proposed Accounting for Financial Instruments with Characteristics of Liabilities, Equity, or Both: AAA Financial Accounting Standards Committee. Accounting Horizons, 15(4), 387.

Solomons, D. 2005. Making Accounting Policy: The Quest for Credibility in Financial Reporting. New York: Oxford US.

Van Riper, R. 2004. Setting Standards for Financial Reporting: FASB and the Struggle for Control of a Critical Process. Westport, CT: Quorum Books.

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