BOMI- Budgeting and Accounting
she nevertheless adheres to best practices and follows the specific details written into leases.
As well as dealing with tenants, so also she deals with budgets. She follows legal requirements and best practices in order to avoid errors and ensure maximized income stream
What is the Basic Accounting Equation?
Assets=Liabilities + Owner's Equity
What is the basic accounting equation?
Assets=Liabilities+Owner's Equity
What are the steps involved in the discounting process?
discounting is the process to determine the present value of an investment before it is increased by compounding interest.
single net leases are lease rental payments are when the base rent is paid to the landlord and include property operating expenses incurred by the landlord
double net lease- rental payments are the base rent to the landlord and include property and operating expenses incurred by the landlord. tenant pays separately for insurance and property taxes
what is separate entity?
each business is considered a separate entity distinct for the affairs of other businesses and the personal affairs of the owners
When evaluation companies based on earning per share, what consideration should be taken into account?
earnings per share is usually more important than any other ratio. but more often then not are used to compare company's in the same industry.
what expenses are directly and indirectly affected by changes in occupancy?
elevator service, janitorial service, waste pick up, utility costs and material costs for rest rooms and janitorial purposes. Building personnel costs are also affected
How is stepped rate used in the commercial real estate industry ?
is a lower then average first year rental rate that gradually increases throughout the lease term
What are typical uses for pro forma?
is a projection of operating expenses over a anticipating holding and most often used for a potential investor to determine if the asset in question will generate sufficient yields if purchased
What purpose does the expense distribution report serve ?
is a report or tool that is used to be able to conduct a quick review of the full payment history associated with each distinctive vendor
what is a general ledger ?
is the ledger that contains all the active accounts from the chart of accounts in account numbered order. the accounts are ultimately used to generate financial statements
How is amortization commonly applied to a commercial property's prepaid expenses ?
is the systematic allocation of the cost of an intangible asset to an expense account on the cash basis income statement
What is the purpose of the audit trail ? (16)
is to leave a record that auditors can verify
How is the receivable summary report applied in the review of a property's records ?
it enables the owner to know that all tenants have paid their rent in accordance to the budget and lease agreements. reimbursements , security deposits, and other collections are also reflected on the receivable summary
the operating information highlights, recurring costs, highlights of regularly monthly services and reveals recent major repairs , rehabilitation and trends
it may also identify areas requiring additional concentration and expenses
A prospective tenant for the vacant third floor office space in Miguel's building is a branch location of a national chain of insurance agencies. Since Miguel is unclear if the corporate office for the chain will pay rent or the branch leadership,
it will be necessary to__ the name of the lessee if the prospective tenant elects to rent in the building. a. omit b. document c. remove d. ignore
Operating under the modified accelerated cost recovery system (MACRS) since 1987, the management at Skyward Office Complex can establish the useful life (via depreciation) of
its commercial nonresidential real property to years. a. 15 b. 19 c. 25 d. 39
conversely, a company that is deficient in working capital and unable to do these things, is in a poor competitive position
its survival may even be threatened unless its working capital is improved
what does the E.R.R ...or the Experience Exchange Report use to compare actual performance of the mall against similar commercial retail buildings in a selected region
per square foot of operating costs........not the size or number of buildings
what is going concern?
once formed, a business entity is expected to exist indefinitely as a going concern. fluctuations in the market values assets are not reflected in the books and records of the entity.
What procedures are associated with administration of the cash receipts journal?
one time charges are copied into the cash receipt journal in the month that the charge occurs. the date on the charge, must fall within the month of the current cash receipts to be reflected for that month
What are examples of common lease clauses particularly significant to the building professional and tenant ?
parties to the contract, commencement date of term of lease, delay of possession , rent amount, requirements for payment, late charges, additional rent, security deposit, subleasing and excess rent, continous operations, holdover, option to renew
What are common components to include in a review of a buildings operating history?
past two to three years worth of past budgets as well as the current year to date.
What asset types are commonly amortized ?
prepaid expenses such as insurance, taxes and other intangible assets
what is used as the common benchmark in the commercial real estate industry?
price per square foot
What are examples of common billable expenses on a lease? (pages 4-5 to 4-8)
real property taxes, operating expenses, common area maintenance charges, electricity,
a P.O log is then created and lists the most pertinent information on the P.O and P.O's are periodically updated as the order is completed
the P.O log is used for researching vendor payment requests and helps with preparing on going budget revisions
How are CPI increases determined? (page 4-20)
the CPI is determined by comparing the anniversary CPI to the base CPI, and the difference is quantified as a percentage and then applied to each tenants negotiated fraction of that percentage
What are the best practices for communicating charges to tenants ?
the building professional must provide the tenant as much information with a explanation to ensure they understand. transparency is key in communicating charges to tenants
Which calculations are used to determine a company's debt service ratio?
the calculation is performed by adding back the interest expense to income before taxes
How is the cash flow statement used ?
the cash flow statement summarizes what changes in cash have occurred from one period or year to the next. it is a useful resource for providing an overview of a buildings financial status overtime.
Cash Journal-list all expenditures and receipts for each business day and the resulting effect on the bank balance.
General Ledger-a collective record of all the active accounts of the entire business in numerical order.
what are the generally accepted accounting principles ? (GAAP) (19)
Generally accepted accounting principles (GAAP) are a common set of accounting principles, standards, and procedures that companies use to record accounting data and compile their financial statements.
What is a Management Agreement?
It is a document that outlines the scope of the work required to manage the property, the compensation, and the reporting requirements.
What is a contract?
It is a legally enforceable document between two parties.
What is rent roll?
It is a quick reference of an entire property that contains information about each tenant.
What is a Cash Flow Statement?
It is a report that describes the changes in cash from one period to the next.
What is a Balance Sheet?
It is a statement of the financial position of a business entity at a particular point in time, reflecting the accounting.
Define Income Statement.
It is a statement prepared on an annual basis reporting net income or net loss from revenues earned and expenses incurred.
What is a vacancy report?
It is a summary of all of a properties vacancies
Define Accrual Basis Accounting.
It is a system that adjusts cash activity for current period activity that did not occur in cash for both revenue and expenditures. Income and Expenses are recorded when due and not when received or paid
What is BOMA International's Functional Accounting Guide?
It is an account guide specifically tailored to the commercial real estate industry
What are Accounts Payable?
It is debts owed to other businesses which are recorded as liabilities on the balance sheet.
How is a checks and balances system established?
It is established by having different individuals perform different functions. Ex) those who authorize payments are not the same ones who mail checks
Why is attention to accounts payable important?
It is important because prompt payment to vendors, suppliers, etc facilitates good relationships.
Why is record keeping important?
It is important because records are required for meeting future reference needs as well as for ensuring accuracy and for meeting tax and legal requirements.
What are Accounts Receivable?
It is monies earned, but not yet received, which are recorded as assets on the balance sheet
What is the cash method?
It is the accounting method in which income and expenses are recorded only when received or paid out.
What is a chart of accounts?
It is the list of line items or categories that classifies accounts.
What is Budgeting?
It is the process of planning for the coordination of resources and expenditures.
What is bookkeeping?
It is the process of recording and classifying transactions.
What is accounting?
It is the system of summarizing, interpreting, and communicating financial data
What is the goal of the property or facility manager during the holding period of the property?
It is to enhance the value of the property, thus providing a profit potential upon final sale.
What does a budget reflect? .
It reflects the priorities of the business and the resources needed to accomplish them
and total disbursements are transferred to the cash account as a ......?
credit
What considerations do both creditors and owners make when reviewing equity percentages for a company ?
creditors like to see high proportion of owners equity because equity acts as a cushion in absorbing losses. the greater the equity of the owners in relation to liabilities,
When analyzing tenant balance sheets, Hilda pays close attention ..blank..to Adequate amounts of this enable companies to carry sufficient inventories, meet current debts, and take advantage of cash discounts.
a. accumulated depreciation of assets b. market interest rates c. working capital d. the size of the workforce
Noreen, a member of the finance office staff, brings Rudy the PO log. This log is a numerical listing of all purchase orders:
a. accepted. b. completed. c. issued. d. paid.
What are the benefits of depreciation ?
building professionals benefit from depreciation of assets accrued through capital projects because depreciation is subtracted from net profits before arriving at taxable income.
The process of planning for the coordination of resources and expenditures is known as: a) accounting b) reporting c) budgeting d) bookkeeping
c) Budgeting
All of the following are considered accounts payable except: a) vendor payments b) supplier payments c) rent payments from tenants d) service provider payments
c) Rent payments from tenants
If we grow to the point where we become a large multinational company doing busi¬ness in many countries, what set of accounting principles, standards, and procedures will we use?" asks Janet. "Well then," Harold responds, "in that case, we'll have to use the a. ASC b. GAAP c. IFRS d. SPF
c. IFRS
Regardless of the particular financial statement Hilda reviews, they should all adhere to GAAP and be based on certain global assumptions. One such assumption, or concept, is..blank.. , which assumes the worth of all a
company's assets is measured by the original cost rather than the present market value. a. separate entity b. stable monetary unit c. monetary equivalence d. going concern
How does compounding affect capital investment ?
compounding is simply interest earned on interest allowed to accumulate. compounding is based on time value of money, the notion that a rate of return should be expected from capital invested over a period of time
What is compounding ?
compounding is the calculation of interest on the principal amount, plus interest on the interest accrued during previous a period
What strategies might be employed in the process of appealing a property tax?
contact a property tax consulting firm that specializes in this work and have them complete a review of the building assessment
Explain accounting control strategies as they are used in real estate. (22)
control strategies place to detect fraud or theft but are primarily put in place to avoid human error. strategies to avoid missed cash collection, or conversely excessive outflows that deplete an owners cash. These include, collections, costs controls
what is a fixed cost?
cost types that don't change . for example, a mortgage payment
What are semi variable costs ?
costs that have both fixed and variable costs attached to them. landscaping and ground maintenance fees is a common semi variable cost. seasonally they vary
What is a variable cost?
costs that vary from month to month, like utilities
Describe the purpose of a chart of accounts , as well as its components . (8-9)
the chart of accounts is the list of line items or categories that classifies accounts. charts of accounts are customized to fit the purposes of the business , and accounts are listed by function
4. the international facility management. 5. international council of shopping centers.
6. national association of industrial and office properties
What are the three sets of books that companies typically keep?
General Journal-all transactions recorded in chronological order.
What are the levels of detail in the BOMA Chart of Accounts?
1) Categories of Building Operations 2) Means and methods by which building functions are achieved 3) subcategories
What is the typical journey of a purchase order?
1)Quotes received 2)PO issued 3) Vendor receives PO 4) Vendor supplies goods or services
Which organizations provide reports used for bench marking performance in the commercial real estate industry ?
1. BOMA - experience exchange report 2. institute of real estate management 3. national association of real estate investment trusts .
3. employers F.I.C.A - percentage gross wages set by the federal government
4. Workers compensation and health insurance , based on insurance rates provided by employers insurance carrier
3. identify a success ratio in obtaining renewals for lease expiring during the year
4. quantify leasing efforts needed to market vacant space
What elements are often seen on the payroll register ?
1. F.U.T.A -percentage of gross wages set by federal government 2. S.U.T.A - percentage of gross wages set by each state government
What considerations should the property manager make when completing a field review of financial statements ?
1. are all expenses properly classified and reflected in the cash basis income statement
What are the three functions of the revenue cycle
1. billing tenants 2. Collecting what's billed 3. reporting of billing and collections
What are the benchmarks against which a property's actual performance can be compared ?
1. budget comparisons and variances 2. prior year comparisons 3. industry comparisons
What are the common categories into which costs are segregated for accounting
1. cleaning costs 2. Administrative costs. 3 real estate taxes. 4. Building insurance
What are the advantages to using a purchase order? (7)
1. clearly outline good and services being provided. 2. outline the general terms of conditions of the purchase. 3.track purchases in chronological order. 4. limit access.
Which ratios are commonly used to determine a company's earning power?
1. earning per share 2. return on equity 3. common size comparative statements
What are the categories of escalatable costs? (pages 4-11 to 4-13)
1. expense vs capital 2. operating (recoverable) versus non operating ( non recoverable ) 3. indirect versus direct
What are the common elements of the rent roll that need to be updated ?
1. new leases not yet abstracted 2. commencement letters, extensions, expansions, and other changes to space requirements 3. amendments, addenda items, and other changes to terms of existing leases
What are other income amounts that must be budgeted for ?
1. parking. 2. storage. 3. antenna/satellite dish rental. 4. rooftop solar panels. 5 wind turbines
what are the stages of budgeting base rent?
1. schedule base rent monthly for each existing tenant 2. increase base rents for future stepped rent increases
What are the common uses for the monies collected through mill rates?
1. schools, 2. road maintenance, 3. sewer maintenance, 4. public health and safety, 5. public employees, 6. bond interest and sinking funds
Which basic accounting concepts underlie all financial statements ?
1. separate entity 2. going concern 3. stable monetary unit
Explain the methods for abstracting a lease ?
1. the first page or two is refereed to as business points, and has important dates and all rental payments , including changes and increases . the second way is the lease is abstracted by
When looking at the current ratio for a company, which adjustments might need to be made?
1. the nature of the company's business 2. the composition of its current assets 3. the turnover of certain current assets
What are three types of audit options?
1. unqualified- a clean opinion 2. qualified- the auditor has some reservations about the financial statement
2. Does the cash basis income statement reflect any inappropriately coded or inaccurate presentations of income or expense activity
3. does the cash balance income statement tell the owner exactly what occurred in the financial operations of the building for the month
What regulations exist regarding depreciation in the United states
1981 to 1986 U.S , congress prescribed one method call accelerated cost recovery. this resulted in a annual depreciation amount between 15-19 years.
Scenario - Chapter 13 Nestor is performing a review of the building's financial statements. As property manager at Glass Spire (a downtown office tower with an above average tenancy), he knows that it's not enough to simply offer an attractive space and charge a high rent.
A careful review of the financial statements can alert him to both potential and current issues. He wants to know how much money comes in, how it is allocated,
What should be included in a tenant file?
A copy of the lease, lease summary, lease amendments and escalation clauses, correspondence, rent rolls, rent roll change instructions, floor plans
What is a Liability?
A debt that is owed.
What is a Chart of Accounts?
A detailed listing of the accounts to which income and expenses are assigned
What is a typical tenant file?
A file containing information about each tenant including copies of leases, lease summaries, and escalation clauses.
What is a tickler system?
A method used to remind the user of key dates and deadlines.
What is a delinquency report?
A monthly summary of overdue payments, actions taken to collect, and other information,
What is an audit trailer
A record of every financial transaction associated with a property.
What is the difference between net and triple net lease?
A single net lease requires the tenant to pay only the property taxes in addition to rent. A double net lease, the tenant pays the property taxes and insurance premiums. A triple net lease, net-net-net lease, requires the tenant to pay rent plus all three additional expenses
What are common accounting methods used for recording financial transactions ? (21)
Accounting and financial reports can be prepared on a cash, accrual, or modified accrual (also known as hybrid) accounting basis.
Describe the roles filled by a accountant (3)
Accounting is a system of summarizing, interpreting, and communicating financial data.
What are the primary functions associated with accounting ? (4)
Accounting is the next step in the process. Accounting is the system of summarizing, interpreting, and communicating financial data.
he is accustomed to, has many big-name stores, and the property is perceived as very pleasant . Since he's new on the job, Rudy plans to meet his new col-leagues and walk around to see for himself how things are routinely done.
Additionally, he's going to ask his new fellow employees what their perceptions are about a number of matters. He will then develop his strategy for prioritizing problems to solve and corrections to make.
6. If the proposed window replacement project is approved, Cory can use a sophisticated method of analysis to compare this expenditure to alternatives.
All of the proposals are expected to produce benefits for a time period greater than one year. This method, which factors in all current and future financial ramifications of a project, is known as:
Scenario - Chapter 1. Harold, an experienced finances manager for Beach Properties, hired Janet and is reviewing the various aspects of budgeting and accounting that she will need to understand and perform.
Although she majored in finance at the local college, she lacks real world experience. As Harold works with her over the next few weeks, he will seek to gauge her level of understanding of budgeting and accounting fundamentals.
What is an Account?
An individual records of information and transactions related to each asset or liability and to each aspect of owners equity.
What is Asset?
Anything of value that is owned.
To the degree you are able to assume the role of accountant, Harold informs Janet, you'll engage in many more functions. However you will not be responsible for ....Blank ... Financial data
B. memorizing
What are two categories of rent? (page 4-3)
Base rent provides a return on invested capital and includes scheduled rent increases ,sometimes referred to as rent steps or stepped rent, over the lease term.
What is true for both sides of the accounting equation?
Both sides of the accounting equation are always equal.
Specify functions incorporated in the budgeting process. (4)
Budgeting is the ongoing process of coordinating resources and expenditures. Through this process, a plan is created with research and data as the foundation.
How do owner's control costs?
By assisting in budget preparations, tracking monthly budget variances, and establishing internal controls for purchases.
How do building owners control costs?
By tracking the efforts of building manages and by ensuring internal control procedures to be adequate to ensure that the actual spending process proceeds within parameters as established by the budgeting process.
When determining the capitalization rate for an investment in a property, which variables should be considered ?
Capitalization Rate(R) = Net Operating Income ( I )/ Value (V)
Explain the process that owners use to classify income?
Cash received or amounts charged are recorded as income on the financial statements, and the amount associated with each code are then transferred to the general ledger, as the current outstanding balance.
Chapter 1 - older version
Chapter 1 - older version
Chapter 10
Chapter 10
Chapter 11
Chapter 11
Chapter 12
Chapter 12
Chapter 13
Chapter 13
Chapter 14
Chapter 14
Chapter 2
Chapter 2
Chapter 2 - old version
Chapter 2 - old version
Chapter 3
Chapter 3
Chapter 4
Chapter 4
Chapter 5
Chapter 5
Chapter 6
Chapter 6
Chapter 7
Chapter 7
Chapter 8
Chapter 8
Chapter 9
Chapter 9
What types of controls are commonly used?
Dating/numbering of invoices Reimbursable expenses backed by receipts Accounts numbers on invoices Etc.
if a general ledger is prepared correctly , cash disbursements are transferred to expense accounts as a ...?
Debit
Fill in the blanks: To make an accounting entry that increases the value of an asset you will _______ that asset account; to make an entry that decreases the value of an asset, you will _________that asset account.
Debit, credit
What are Accounting (Internal) Controls?
Efforts made to safeguard assets, ensure accurate and reliable accounting data, promote efficiency,and adhere to prescribed management policies.
Elvin, the new property manager, has been hired to solve this problem and make Ideal Towers profitable. Given the building's physical location,
Elvin suspects that revenues and expenses are not being properly recorded. He begins his investigation of the problem.
Scenario 11- As property manager of Bayview Mall, Douglas has many responsibilities. However, potential irregularities have been spotted, and senior management requires a complete review. If Douglas is to satisfy senior management, he will have to thoroughly review the cash basis income statement.
He admits that he's been very busy overseeing several projects, but he promises to give this his full attention. This means that he not only has to collect and review related documents and reports at the building site, he'll also have to work with the bank for comparison purposes.
Miguel wants to know how space is allocated among tenants in each floor of his multistory, multi-tenant building. Also, he wants a visual representation of which suites are vacant and the expiration dates of the tenant leases.
He should request the: a. rent roll. b. stacking plan. c. stepped rent report. d. tenant profile.
Instead of using the operating costs from a base year of operation to assess modified gross lease rent increases, Carmichael Properties uses the expense stop method. This is a somewhat confusing method, and Carmichael and its tenants experience this confusion.
However, in spite of what people may believe, the rule is that when the expense stop is reached, the owner ..blank..paying and the tenant ..blank..paying. a. begins; begins b. begins; stops c. stops; begins d. stops; stops
How are cost increases calculated for a property? (page 4-10)
In a modified gross lease, the increase in payment required from each tenant may be calculated using either a base year or a base amount.
Scenario 12-Gina, the property manager at Skyward Office Complex, will soon retire. She is working with Dan, who will take her place. Dan has the education and some experience, but he knows that what Gina tells him is likely to be more important than anything he learned in class.
In particular, while he passed his finance courses, he knows that he will now have to start applying that knowledge in real-world situations.
What are three basic external reports?
Income Statement Balance Sheet Statement of Cash Flows
Miguel has a tenant who paid rent three days after the due date. To determine whether or not additional charges should be assessed against this tenant because of his tardiness, which of the following common significant lease clauses should
Miguel consult? a. holdover b. option to renew c. late charges d. security deposit
Natalie is dissatisfied with the kind of lease Carmichael Properties employs with the tenants of the retail mall it owns. Since Carmichael incurs the costs of advertising and special promotions to make the mall attractive to consumers,
Natalie wants Carmichael to take advantage of ..blank..clauses, which will allow Carmichael to recover these expenses and risks by participating in the success of the retail tenants.
Scenario - Chapter 9 Lakeview Office Park is located just outside of a large city in the western United States. Jennifer, a successful real estate investor, is the owner of the property. Although she rarely visits the property, she maintains frequent communication with Phil (the property manager).
Phil knows that while Jennifer may not visit the site often, she nevertheless demands detailed information on the operation of the office park. .
when a investor knows the present value of a future amount needed, he or she can discount the anticipated future value by an anticipated interest rate to determine the amount of timing of capital needed to have the future capital available
Present value = Future Value / ( 1 + i ) n squared
List several advantages of using purchase orders.
Purchase orders allow purchases to be tracked in chronological order, limit access, centralize purchasing, consolidate orders and discounts,
Scenario - 8 . Best Properties wants to get control over the high costs associated with its shopping mall, so the company convinces Rudy, through incentives and a high salary, to become the property manager.
Rudy has a reputation for getting things organized and finding ways to minimize costs while keep things running smoothly. The mall situation is unique to him because it is located in a more upscale suburban neighborhood than
Rudy's review of the mall's books from the past few years reveals separate portions of the budget and income statement for administrative cost, cleaning cost, real estate taxes, and building insurance, as well as a number of other logical categories.
Rudy is pleased to see that the office finance staff is using a process called: a. expense tracking. b. outflow recording. c. cost accounting d. expenditure isolation.
What information should be included in a delinquency report?
Scheduled amount of money due and unpaid, length of time amount is past due, actions taken to collect, status of eviction proceedings.
He seeks to minimize expenses and maximize the benefit realized from purchases for equipment, products, and services. He believes that he can more easily bring the budget into balance by keeping a watchful eye on expenditures.
Senior management is encouraged by these efforts and they eagerly anticipate his upcoming progress report
Expectations are high as she has a good track record of increasing profitability no matter how well or poorly a property might be performing.
She immediately begins her examination of the various income streams to understand what is working and what is not
Failures in these areas in the past caused Peachtree both financial and legal difficulties; Hilda was hired, base on her reputation, as a response to the past failures.
She understands management's expectations of her performance and is confident that careful adherence to GAAP, to standard practices, and reliance on the tenant financial statements will prove beneficial to her and to Peachtree.
What are international accounting standards ?(19)
Standards established and maintained by the International Accounting Standards Board, that are used by multi national companies
What are the major financial transactions that must be monitored during property management?
Tenant Collections Vendor Payments Monthly Operating Results
explain the relationship between the balance sheets and summary accounts (15)
The balance sheet is literally a statement of the balances, or amounts, within all of the assets, liabilities, and owner's equity summary accounts of the business.
Scenario- Chapter 10- Western Properties owns the State Building. This historic building was converted many years ago into a mixed use property: retail stores on the ground floor, offices on the middle floors, and luxury apartments in the upper tower.
The building has been profitable over the years for Western Properties. As an older building to begin with, however, its condition has now reached the point where certain capital investments must be considered.
Scenario - Chapter 5 . Ideal Towers is well located and structured. It is in the downtown core, surrounded by shops and restaurants. It is also on the eastern bank of the river, which features a long open area park, and is close to the main commuter train station.
The building itself is relatively new, has ample underground parking, and offers office suites amenable to various configurations for tenants. Nevertheless, Ideal Towers struggles to make money for the owners.
How is rent viewed from a legal perspective? (page 4-3)
The courts often require the term rent to describe all of these monies collected by a landlord. Other income is still considered rent from a legal perspective,
Define Revenue Cycle.
The functions required to exchange products or services with customers for cash.
List the three common financial statements used for external reporting.
The income statement, balance sheet, and cash flow statement.
What is Owner's Equity
The owner's share or contributions either as an initial investment or as subsequent cash infusions.
The landlords at Ideal Towers sometimes have to charge holdover rent. For such a tenant, whose base rent is $25,000 per month, the landlords apply a holdover rate of 1.25.
This means that the holdover tenant should pay..blank.. per month. a. $20,000 b. $31,250 c. $56,250 d. $62,500
Incorporating high-tech features into the building will justify high rental rates, while replaced and refurbished elements such as roofing will help retain satisfied tenants. Of course, Western Properties cannot afford everything at once.
The senior management of Western Properties works with Cory, the property manager, to design a capital budget that will serve their interests, but remains affordable.
Unfortunately, the owners of Ideal Towers have not been charging all the rent that they are entitled to charge. For example, they could pass on the costs associated with operating expenses, real estate taxes, and common area maintenance.
These charges would be considered..BLANK.. rent. a. additional b. base c. categorical d. defined
Describe standard financial statements that businesses use? (20)
These financial statements consist of an income statements, a balance sheet, and a statement of cash flows.The income statement shows revenues earned and expenses incurred in earning those revenues, resulting in net income or net loss for the period.
GAAP is a combination of authoritative standards (set by policy boards), as well as commonly accepted ways of recording and reporting accounting information.
These standards are codified by the Financial Accounting Standards Board (FASB).
What are some advantages of using purchase orders?
They allow for tracking purchases in chronological order, limit access, centralize purchasing, and provide for safeguards against unauthorized use of company funds,
What purpose do records serve?
They allow raw data like rental payments, utility bills, etc to be converted into more permanent forms that can be retrieved and referenced later.
What are transactions?
They are financial events that are recognized within a financial statement or report.
Why are controls necessary?
They are necessary to establish checks and balances for detecting irregularities in bills.
What are Cash Controls?
They are procedures to ensure that cash is properly handled and to combat human error.
What does a purchase order contain? c.
They contain the product or service requested, prices, payment terms, vendor address, PO# et
Miguel reviews the proposed lease of another prospective tenant who will pay base rent to the landlord, as well as property operating expenses incurred by the landlord. However, the tenant will pay separately for property taxes.
This best describes a(n) ..blank..lease. a. single-net b. double-net c. triple-net d. absolute net
Ideal Towers has had its share of delinquent tenants. Elvin takes steps to ensure that his office will follow generally accepted practice regarding tenant receivables.
This means that monthly reminders will be delivered to tenants on or before the..blank.. of the month preceding the due date. a. 1st b. 10th c. 17th d. 25th
Sheila has the leasing team develop the leasing budget for the downtown office property. Likewise, she has the operations manager develop the building operating budget for the same property.
This practice represents budgeting. a.incorporated b. designated c. incorporated d. responsibility
One prospective tenant is starting a new business and does not anticipate much cash flow in the first few years. As a result, the tenant requests the type of lease that ensures the land- lord pays for all expenses of property operations.
This tenant wants a ..blank..lease. a. net b. gross c. seminet d. semigross
Define Expenditure Cycle.
Those functions that require property, goods, services, and labor; pay for them; and classify, summarize, and report what is acquired and what is paid for.
both lessors and lessees. He's not suspicious by nature, but he knows that if he bypasses the lease agreement for one tenant, soon all tenants will expect the same treatment.
To avoid difficulties, he works carefully with all parties before the lease is signed to ensure that everyone is satisfied and understands his or her respective rights and obligations.
What is the goal of the accountant during the holding period of the property?
To deliver accurate, meaningful and timely financial reports to the decision makers managing the property.
How do the property and facility managers use periodic financial reports?
To plan facilities budgets and make business decisions to best enhance the needs of the building occupants, market forces, and the objective of enhancing value.
identify reports common in the commercial real estate industry that aid building professionals in making decisions about use of space, funds, and interactions with tenants (15-16)
Vacancy, delinquency and rent roll are all import reports that help building professionals make decisions
A new tenant to the building Miguel manages decided to install new carpeting in the suite it will soon occupy. The tenant is responsible for overseeing and financing the carpet installation, which has fallen behind schedule and delayed the date when the tenant planned to move into the suite.
Which lease clause should Miguel consult to confirm whether or not he should hold off on assessing rent charges for the tenant until the carpet installation is complete? a. customary and additional services b. delay of possession c. rent amount d. subleasing and excess rent
Scenario- Chapter 7 - City Medical Complex offers basic healthcare services to the public and also leases space to medical researchers. Kevin is the property manager of City Medical Complex.
While the hospital's senior management is concerned with the rising costs of healthcare, Kevin is concerned only with the efficient and thrifty operation of the building. He is presently examining expenditures associated with the operation of the complex.
Among the staff at a commercial property, which roles are typically responsible for reviewing tenant financial statements
a chief financial officer, controller or some other certified accounting professionals complete a more thorough of the audited financials provided by tenants
What does a company's merchandise inventory turnover reveal about the company's financial state?
a company's merchandise inventory is the number of times its average inventory is sold during an accounting period.
What are the different types of gross leases
a gross lease- the tenant pays only the base rent , without any other additional rent or operating expenses a modified gross lease is where the tenants agrees to pay for building expenses over a pre-established amount
what type of purchase order copy would be sent to the property manager once it is approved
a numerically filed copy
How is a payment register used at commercial properties ?
a payment registry is a detailed summary of all cash disbursements or payments going out. it is generally organized by cheque number and items without a cheque number, such as service charges or authorized payments
Which components comprise a banks records for a property that uses the banks services ?
a record of each cash receipt and disbursement for the property during the month
Scenario- Chapter 6 . One of the reasons Best Properties manages to make a profit on its many property holdings is that Sheila is such a careful property manager. She knows, for example, that income is a function of budgeting and is not simply
a result of high rents, clever marketing, or luck. Both the owners of Best Properties, as well as the tenants in the various buildings, trust her judgment. While flexible with tenants,
What is required to schedule base rent ?
a worksheet with all the relevant information indicating suite number and square footage. by reviewing the rent roll the base rent per square foot , or monthly rent can be obtained .
Recognizing revenue during the period it is earned and not necessarily received and recognizing expenses when the obligation to pay is incurred and not necessarily when they are actually paid, is called the:a) accrual method b) cash method c) hybrid method d) balancing method
a) Accrual method
What is the emans companies use to organize how the company orders and buys what is needs to do business? a) Purchase orders b) accounts payable c) accounts receivable d) company direction
a) Purchase orders
Owners are involved in cost control via all of the following means except: a) setting internal reporting procedures b) tracking monthly budget variances c) limiting spending authority in the management agreement d) monitoring budget preparations
a) Setting internal reporting procedures
BOMA International's Functional Accounting Guide is specific to the commercial real estate industry in that it segregates expenses according to the: a) functional cause, such as cleaning or repairs b) vendor or supplier c) type of occupancy, such as retail or parking d) ownership structure
a) functional cause, such as cleaning or repairs
In reviewing data on buildings in BOMA's Experience Exchange Report, Nestor notices that there is an even number of buildings on the list. The two in the middle have values of $0.84 and $0.96 per square foot. What is the median?
a. $0.84 b. $0.90 c. $0.96 d. $1.80
4. What value would Cory calculate for a project with a six percent capitalization rate and a net operating income of $150,000?
a. $9,000 b. $900,000 c. $2,500,000 d. $250,000,000
BOMA's Experience Exchange Report has mid-range figures. The mid-range would show Nestor how the data are distributed within the middle of the data.
a. 10 percent b. 25 percent c. 33 percent d. 50 percent
Zelda calls her staff together for their first meeting. She correctly emphasizes that, first and foremost,..blank.. is what creates the foundation for sound decision making based on information, proper year-end reconciliations, and for compliance with tax and legal requirements.
a. accurate record keeping b. education in finance c. managerial guidance d. team dedication
Elvin explains to his colleagues that with rent abatements, the rent periods are often...blank... the terms of the lease. Also, the rents may apply to ..blank..only.
a. added to; base rent b. added to; additional rent c. subtracted from; base rent d. subtracted from; additional rent
Nestor is evaluating the property's performance. According to standard practice, he should evaluate performance against the benchmarks of industry comparisons, prior year comparisons, and budget
a. addenda b. deficits c. surpluses d. variances
The first thing Natalie does is to examine the two main categories of rent for Carmichael's properties. The two categories are base rent and rent.
a. additional b. auxiliary c. taxable d. nontaxable
7. Cory takes a long-term view when budgeting for larger capital items. The typical five-year capital plan would likely not factor in money for:
a. aesthetic improvements. b. major equipment replacements. c. energy-efficiency improvements. d. biodegradable cleaning products.
In discussions with his office's personnel, Elvin discovers that they have never used...blank.. rent to their advantage. This type of rent typically offers rents that are below-market; but rise over the life of the lease.
a. aggregated b. benchmarked c. cascaded d. stepped
Although it has not proven to be a problem, Natalie reminds her colleagues that, from a legal perspective,..blank.. income received by the owner of a property is considered to be rent.
a. all b. most c. some d. no
Kevin and a representative from Heavenly Cleaners agree on a price for the services to be provided. Thereafter, a purchase order is drawn up. A purchase order:
a. allows the vendor to unilaterally deviate from the negotiated price. b. allows the purchaser to unilaterally deviate from the negotiated price.
If Phil is to estimate utility costs for the upcoming year properly, which of the following could he reasonably use?
a. an almanac b. projected occupancy changes c. assumed utility rates from last year d. verbal agreement on rates with the cleaning/janitorial vendor
To ensure that Carmichael Properties receives the value of a dollar of rent adjusted for inflation, base rent is increased annually based on increases in the CPI. Increases are determined by comparing the..blank..CPI to the base CPI.
a. anniversary b. averaged c. expected d. traditional
Other sources of income do not escape Sheila's notice. These other sources, such as parking, storage, and rooftop solar panels, require a(n) schedule to show additional rent charges.
a. annual floor-by-floor b. annual tenant-by-tenant c. monthly floor-by-floor d. monthly tenant-by-tenant
Gina asks Dan how he would categorize expenses such as taxes, insurance, and contracts for services. He properly responds that these are most often expenses.
a. annualized b. averaged c. prepaid d. postpaid
2. When setting aside cash reserves for future projects, the ownership of Western Properties can enjoy the benefits of..blank.. , which is the earning of interest not only on principal, but also on the interest accrued.
a. arbitrage b. compounding c. diversifying d. margins
Gina has Dan work on amortizing the building's insurance expenses. In order to ensure that these expenses are accurately recorded, Dan should completely remove the insurance premium from the cash flow statement and record it as a(n):
a. asset on the balance sheet. b. asset on the cash basis income statement. c. debit on the balance sheet. d. debit on the cash basis income statement.
When Janet "balances the books" (or the summary accounts), she will basically be dealing with: a. assets, liabilities, and owner's equity. b. tax planning, revenues, and liabilities. c. liabilities, budgets, and owner's equity. d. owner's equity, capital, and tax planning.
a. assets, liabilities, and owner's equity
If Kevin were to examine his organization's payroll register, which of the following elements could he expect to find on it?
a. assumed liabilities b. gross wages c. property taxes d. zoning expenses
Given the past disarray of Clarkson's records, Zelda is doing her best to prepare for the inevitable audit. The audit trail that she is attempting to construct leaves a record that__blank _can verify.
a. auditors b. managers c. law enforcement d. professional groups
Dan also works on recording supplies. In this case, when supplies are used in the operation of the property, the applicable cost value is transferred from the:
a. balance sheet to the cash flow statement. b. cash flow statement to the balance sheet. c. balance sheet to the cash basis income statement. d. cash basis income statement to the balance sheet.
As he has worked with tenants (both current and prospective) over the years, Miguel continually reminds them of the main function of a lease. The lease's main function is to protect the interests of the:
a. bank and the landlord. b. landlord and the tenant. c. government and the bank. d. tenant and the government.
Jennifer will ask Phil about the tax assessment of the property. If she is unsatisfied with the assessment, she may appeal. Phil correctly informs Jennifer that building management is granted one right of appeal.
a. biannual b. annual c. semi-annual d. quarterly
Elvin discovers that the finance department does not pay heed to the three functions of the revenue cycle. For instance, no one in the department understands that the final step in the revenue cycle is:
a. billing tenants. b. collecting what is billed. c. rank ordering what is billed. d. reporting of billings and collections.
When referring to BOMA's Experience Exchange Report, Nestor should expect the true aver- ages contained in the report to measure costs or income per square foot referring to the number or size of buildings contributing data.
a. by b. without c. sometimes d. mostly
Elvin ensures that the collections and charges they receive are properly classified. This means that he, as property manager, and the accounting staff should assign a..blank..to each category of income they collect or charge.
a. cell slot b. transaction code c. specification number d. chart of accounts code
6. Douglas' review of the general ledger convinces him that his accounting staff have performed their jobs correctly. Cash receipts are transferred to the income statement as....blank.., ..blank..., and total receipts are transferred to the cash account as
a. credits; credits b. credits; debits c. debits; credits d. debits; debits
1. Jennifer is a typical owner in terms of her requirements for budget reporting frequency. This means that she would expect the budget to reflect all expenses on a basis.
a. daily b. weekly c. monthly d. yearly
c. copied and matched with the appropriate PO. d. copied and filed for reconciliation with accounts receivable.
a. date stamped and matched with the appropriate PO.
Heavenly Cleaners has been performing its duties satisfactorily for a few months. Upon receipt of their invoice, Kevin should first have the invoice:
a. date stamped and matched with the appropriate PO. b. date stamped and filed for reconciliation with accounts receivable.
The mall owners and Rudy have come to an agreement about the expense budget for the coming year. Should Rudy see a material variance from the budget, he will inform the owners early so that they may:
a. defer paying bills. b. raise tenant rent in the coming year. c. review the variance with Rudy to put alternative strategies in place. d. quickly sell the property.
Natalie is concerned by how the various expenses have been categorized in Carmichael's books. Those expenses that are unrelated to the management, maintenance, and repair of the building should be classified as ..blank..expenses.
a. direct b. indirect c. recoverable d. nonrecoverable
1. In the process of bank reconciliation, Douglas can fully expect the bank's property records to contain a record of each cash receipt and..blank.. of the property during the month.
a. disbursement b. interest c. investment d. reversal
In order to calculate each tenant's share of the property cost increases, Natalie would..Blank.. by the tenant's pro rata share.
a. divide the escalatable cost pool b. divide the net cost increase c. multiply the escalatable cost pool d. multiply the net cost increase
Natalie insists on adherence to best practice in communicating changes in monthly estimates for the expense portions of leases. The best practice is to calculate and communicate such changes to tenants by___ to become effective with the monthly rent for January.
a. early October b. late October c. early December d. late December
8. Douglas is aware that some of the budget variances he shares with senior management will likely impact next year's budget. He anticipates that the costs associated with the new fire alarm system will likely be ...blank..in next year's budget so that tenant pass-through payments are reflected.
a. erased b. renegotiated c. reclassified d. increased
7. Douglas recognizes the need for precision as he reviews financial report budget variances he identifies are based on accurate information. In particular, his field review should leave him assured that all..blank..are properly classified and reflected in the cash basis income statement.
a. expenses b. interest rates c. income d. expenses and income
Having decided on Heavenly Cleaners, Kevin has one of his office staff enter the vendor's information into the vendor database. Which of the following is an example of the kind of information that should be entered into the database?
a. federal tax I.D. number b. number of employees c. products used d. year of incorporation
. If Zelda uses the BOMA Chart of Accounts, she should understand that the level that reflects the functional categories of building operations is the ..blank..level.
a. first b. second c. third d. fourth
1. Rudy meets with the finance office staff to learn the various costs of operating the mall. He categorizes all the costs into their appropriate categories. Costs such as grounds maintenance are properly categorized as costs.
a. fixed b. semi-fixed c. variable d. semi-variable
Hilda looks particularly carefully at retail and manufacturing companies with high merchandise turnover. High turnover indicates..blank......merchandising and requires a..blank...investment in inventory.
a. good; smaller b. good; larger c. poor; smaller d. poor; larger
If the unpaid invoice report is properly structured and written, Kevin can use it to track invoices that been coded and been paid.
a. have; have b. have; have not c. have not; have d. have not; have not
If Dan has to summarize for Gina the changes in cash that have occurred from one year to the next, he should present her with the:
a. income budget. b. cash flow statement. c. cash basis income statement. d. accrual basis income statement.
4. Douglas discovers that contrary to standard practice, the...blank., which gives a detailed summary of all cash disbursements, is not organized by check number.
a. income register b. payment register c. balance sheet d. statement of cash flow
3. As the most significant source of cash at any commercial building is rent, Douglas must work with the accounting staff to ensure that rent payments received, reimbursements, security deposits, and other collections are reflected in the:
a. income statement. b. payable summary report. c. receivable summary report. d. statement of retained earnings.
1. Cory meets frequently with the senior management of Western Properties to learn what objectives ownership has with regard to capital improvements. Regardless of the specifics, capital improvement objectives should strive to:
a. increase income and/or reduce expenses. b. motivate employees to the highest possible extent. c. facilitate negotiations with governmental authorities. d. eliminate competition and/or improve positioning.
As Rudy meets with the mall staff, he hears many opinions about the "real" reason building costs vary. Of course, he already knows that the most typical factor affecting variation in building costs is:
a. inflation. b. occupancy. c. building usage. d. government regulation.
The finance office personnel were confused about the nature and obligations of lease reminder notices. Elvin informs them that a lease..blank.. a legally binding contract that ..blank..obligate the landlord to provide the tenant such notice.
a. is; does b. is; does not c. is not; does d. is not; does not
For all cash transaction transfers, Dan knows that each transfer to and from the balance sheet and the cash basis income statement must have a debit and a credit. These transfers are known as:
a. journal entries. b. journal notations. c. bookkeeping entries. d. bookkeeping notations.
Regardless of the amount of experience Miguel might have, the law assumes that as a prop- erty manager, he is a..BLANK..and is therefore held to a standard ..BLANK.. than the building's tenants.
a. knowledgeable party; lower b. knowledgeable party; higher c. non-knowledgeable party; lower d. non-knowledgeable party; higher
If Lakeview Office Park experiences severe changes in occupancy, which expenses could Phil expect to be affected?
a. landscaping b. waste removal c. property taxes d. solar panel maintenance
a. life-cycle costing. b. whole-life costing. c. risk-based analysis. d. income-based analysis.
a. life-cycle costing.
Miguel is changing the way the lease abstracts will be written so that they follow proper and common practice. In its simplest form, a lease abstract is an overview of the most frequently ..blank..items in a lease
a. litigated b. negotiated c.referenced d. taxed
Phil includes a discussion of property taxes and mill rates in his budget report. The monies paid to public agencies and municipalities from these taxes can include all of the following uses except:
a. lobby renovations for Lakeview Office Park. b. city street repairs. c. schools. d. city sewer system maintenance.
2. If the property accounting staff forgot to record any receipts, the bank balance will be...blank..than the property's balance. Likewise, if the staff failed to account for bank service charges, the bank balance will be..blank..than the property's balance.
a. lower; lower b. lower; higher c. higher; lower d. higher; higher
Nestor relies on BOMA's Experience Exchange Report because it assists him in making com- parisons. This report uses the to determine the sample size for each item of comparison.
a. mean b. median c. number of buildings d. high and low difference
8. The senior management of Western Properties reminds Cory to consider the depreciation of the assets to be accrued through the proposed capital projects. If depreciation for an asset acquired through a capital project is not calculated, then..blank. taxes must be paid for it.
a. more b. less c. the same d. undetermined
5. In calculating the net present value of a capital project, Cory would..blank. the present value.
a. multiply the initial investment by b. divide the initial investment by c. add the initial investment to d. subtract the initial investment from
. As property manager, Rudy approves invoices for payment, but he knows that some invoices, such as an invoice for ..blank.., will require approval from the owners.
a. new carpeting for a 20,000-square-foot unit b. one new desk chair for the management office c. salt for treating the parking lot before impending snow d fire extinguisher inspection services.
Among the various assets Dan has to properly handle, which is an example of an intangible asset with expenses that are usually amortized?
a. new roof b. furniture c. tenant moving allowances d. the building itself
In scheduling tenant base rent, Sheila is best advised to use a base rent worksheet with a complete listing of the tenants and:
a. nothing else. b. the suite numbers only c. the suite numbers and square footage. d. the suite numbers, square footage, and interior design specifics.
Harold will soon be introducing Janet to accounting, or internal, controls that maximize cash income and minimize cash outflows. In particular, she will have to learn how to help the company avoid the most common error in properly administering tenant leases, which is:
a. offering lease rates at below-market value. b. not using smartphone apps for lease payments. c. overlooking charges that are properly billable to the tenant. d. delaying the filing of annual forms with the proper governmental authorities.
While recurring monthly charges are copied from the tenant database to the cash receipts journal, ..blank..are entered directly into the cash receipts journal in the month they occur.
a. one-time tenant charges b. Elvin's personal office supply orders c. elevator maintenance fees d. Ideal Towers' leasing brokerage fees
Phil budgets effectively because he begins with the operating history of the property. Part of the operating history is past budgets. How many years back should he go when reviewing past budgets?
a. only one year b. two or three years c. at least five years d. at least 10 years
The personnel in Zelda's new finance office do not really understand the advantages' of using purchase orders. These advantages include clearly outlining the goods being provided, outlining the general terms and conditions of the purchase, and:
a. opening up access to many individuals. b. consolidating orders and discounts. c. decentralizing purchasing. d. the ability to legally enforce the terms.
In her budget projections, Sheila typically enjoys high success ratio in the range of 90 to 95 percent. This is because she combines market conditions with:
a. owner objectives and internal improvements. b. owner objectives and an assessment of past performance.
3. In discussing possible projects and investment for the capital budget, Cory must engage in the process of discounting; that is, the determination of the ..blank..value of an investment based on expected future cash flows.
a. past b. present c. mean d. projected
5. If Douglas needs a quick review of the full payment history associated with each distinctive vendor providing services at Bayview Mall, he will have to use the:
a. payment budgeting plan. b. payment distribution plan. c. expense payment report. d. expense distribution report.
The common set of accounting principles, standards, and procedures that Janet uses to record accounting data and compile the company's financial statements is known as: a. ASC. b. GAAP. c. IFRS. d. SPF.
b. GAAP.
The cleaning contractor delivers his invoice after the end of each month, and payment for the service is made the following month; therefore, the cleaning expense for that month is not properly recorded. Accrual basis accounting maintains that expenses must be:
a. performed for the period the services were invoiced. b. invoiced for the period the services were contracted. c. recorded for the period the services were performed. d. billed prior to completion.
There are a variety of criteria Kevin should use when evaluating and comparing vendor RFPs. However, he need not concern himself with the vendor's:
a. productivity rates. b. experience and reputation. c. corporate headquarters. d. pricing model.
Clarkson will be agreeing to Zelda's request for a tickler system to help ensure that record-keeping responsibilities are met. This system typically monitors the due dates for all of the following except:
a. property taxes. b. lighting bills. c. nonroutine bills. d. insurance.
If Hilda reads the "clean" opinion in an audit report, she would be reading a(n)...blank..type of audit opinion.
a. qualified b. unqualified c. review engagement d. unreviewed engagement
In budgeting base rent, Sheila would like to use the most reliable information. Of the four stages in budgeting base rent, the stage involving the most reliable information would be:
a. scheduling base rent monthly for each existing tenant. b. increasing base rents for future stepped rent increases. c. identifying a success ratio in obtaining renewals for leases expiring during the year. d. quantifying leasing efforts needed to market vacant space.
The controls that Zelda is implementing for the administration of accounts payable and receivable are both necessary and proper. She knows that the individuals who authorize payments..blank.. be the same people who issue the checks.
a. should always b. should usually c. should rarely d. should not
Natalie is also concerned that the members of her department do not seem to understand that cash basis income statements do not conform to GAAP requirements. However, even if the department opts to use cash basis—as opposed to accrual basis—for its income statements, the key is to review the expense accounts to ensure that each category contains a full..blank..of activity.
a. six months b. 12 months c. two years d. four years
Data are being collected for Phil's review of service contract expenses. He knows that Jennifer will require an explanation concerning why each of these contracted services is needed, but he will have an answer because he practices:
a. static budgeting. b. rolling budgeting. c. incremental budgeting. d. zero base budgeting.
As Nestor does not yet use the BOMA Chart of Accounts, he will need to ensure that the line items and the expense detail line items correspond with the information reported for the Glass Spire so that he can compare his data to that shown in BOMA's Experience Exchange Report.
a. summary b. averaged c. median d. sample
Because it is a soft rental market, Jennifer and Phil acknowledge that payment for requested tenant alterations and tenant improvements fall to the:
a. tenant. b. landlord. c. tenant if the cost falls below a predetermined amount. d. landlord if the cost falls below a predetermined amount.
Besides BOMA International and the Institute of Real Estate Management, from which other organization can Nestor obtain reports used for benchmarking performance in the commercial real estate industry?
a. the Property Managers Association b. the Facility Managers Cohort c. the Insurance Institute for Business & Home Safety d. the National Association of Industrial and Office Properties
According to general practice, which individual at Peachtree is responsible for completing a high level, but not a detailed review of tenant financial statements?
a. the owner b. the controller c. the property manager d. the chief financial officer
If Hilda is to make proper use of earnings per share in her decision making, she must real- ize that they are commonly compared to companies in ..blank..industry and to companies within..blank.. market size.
a. the same; the same b. the same; a different c. a different; the same d. a different; a different
BOMA's Experience Exchange Report, while very helpful to Nestor, does have its limitations. Data in the report may not help to plan future projects because they are generally months old.
a. three b. six c. nine d. twelve
Given the history at Skyward, Gina knows that some receivable amounts will not be collected. If specific amounts cannot be identified, a percentage of the receivable can be set up on the balance sheet as a reserve for uncollectible rents and recorded as a:
a. total loss. b. partial loss. c. bad debt expense. d. reserved debt expense.
Among the ..blank..expenses that Natalie can look to for recapturing purposes are real property and operating expenses, common area maintenance charges, and electricity.
a. unusual billable b. unusual nonbillable c. common billable d. common nonbillable
Zelda asks for, and receives, the report that contains the listing of all current tenants in the building along with both financial and physical information. This type of report is the:
a. vacancy report. b. delinquency report. c. rent roll. d. occupancy roll.
A common ratio Hilda could use to determine earning power for Peachtree (as a C corporate structure) would be ..Blank..comparative statements.
a. variable-sector b. common-sector c. variable-size d. common-size
9. Even if the budget is shown to have been fairly accurate for the year, Douglas still has to explain offsetting operating variables. Examples of typical offsetting operating variables include changes in occupancy and:
a. weather. b. regulations. c. capital investments. d. employee dissatisfaction.
According to generally accepted procedure, Sheila should communicate budget variances on a(n) basis in the variance analysis.
a. weekly b. monthly c. semi-annual d. annual
In what practical ways do building professionals use records ? ( 2-3_)
accurate data is what allows stakeholders to take raw data and convert it into useful information from which final decisions can be made. these records are required for compliance with tax and legal requirements
Using generally accepted practice, Hilda considers a current ratio of ..blank..to be a good measure of a company's debt-paying ability, but knows that the nature of the company's business, among other factors, could affect
adjustments to this ratio. a. 2 to 1 b. 3 to 1 c. 4 to 1 d. 5 to 1
How are holdover rents calculated ?
an amount stated as a multiple of the current rental rate. it is charged if the tenant continues to occupy space after the lease term Base rent X Holdover rate = Holdover rent
Scenario - Chapter 4. Given that the ultimate goal of any property owner is creating net operating income (NOI), Carmichael Properties has not been doing well. While the properties they own are in good condition, are situated in desirable locations,
and are highly valued, they nevertheless fail to deliver a decent NOI. Ownership is hoping that the hiring of Natalie as property manager can help turn the situation around. .
Scenario - Chapter 2 . Having been audited in the past, Clarkson Real Estate does not want to repeat that experience. Senior management decides to hire an experienced finance manager to clean up operations, require and maintain proper record-keeping procedures,
and ensure full compliance with laws and GAAP. Zelda has enjoyed the reputation of being such a person. Clarkson was able to hire her by making her a generous offer. She has accepted and looks forward to bringing everything up to standard.
in a cash basis environment, it is easier to illustrate the basic accounting equation by postulating that cash receipts , less cash disbursements equal the change in the cash account
and income accounts are normally credit balance accounts, thus giving rise to the negative balance accounts. expense accounts are normally debit balance accounts
other leases specify area caps that enable tenants to use more space then they are being charged
and some tenant's may be in vacant spaces , so operating expenses for those area's cannot be recovered
it is important to note that the number of shares is important. two companies could have identical earnings , but a difference in the number of shares offered,
and therefore the earning per share would be drastically different even though the earnings for each company are the same. its important to analyze all the information
the function of this data is the user can decide whether most buildings show similar amounts, or whether reports vary widely.
anything fewer then three building will not have amid range report
How is the unpaid invoice report used?
are used to determine invoices that are waiting for payment. the report is generated out of the holding file, where the un paided invoices are kept until they are paid and then removed
What is the stable monetary unit?
as a basis for comparison, financial statements are stated in dollars. Dollars are the most reasonable form of a stable monetary unit. the dollar has been treated as a stable unit of measure, like a gallon
What regulations exist regarding depreciation in the Canada
assets are assigned a class depending on their type, structure, purpose and so on. each class is then prescribed a a specific depreciation according to its class. the depreciation rate is reduced by 50% in the year of acquisition
What are the three summary account types ? (9)
assets, liabilities, and owner's equity—with each other as they increase and decrease with debits and credits.
and each transfer must have a debit and a credit. these transfers , complete with a debit and a credit are know as journal entries
assuming the journal entries are properly prepared, assets should equal liabilities plus owners equity after all transfers are made
The primary goal of property management is to: a) deliver timely and accurate financial reports b) enhance the value of the property being managed c) reduce costs d) keep the tenants satisfied
b) Enhance the value of the property being managed
Records convert raw data into a: a) report to be be reviewed by management b) permanent form for later reference and retrieval c) statistical chart d) readable format
b) Permanent form for later reference and retrieval
In determining a company's debt service ratio, Hilda would first ..blank..mine the amount of income available to pay debt service. a. add back interest expense to income after taxes
b. add back interest expense to income before taxes c. subtract back interest expense from income after taxes d. subtract back interest expense from income before taxes
"Janet, your main job function for the next few months will be to record and classify transactions" says Harold. "In other words, you will be performing the process of..Blank.. a. accounting b. bookkeeping c. budgeting d. financing
b. bookkeeping
For now, Harold has Janet prepare financial reports on a(n) basis, as it is the most basic method. a. accrual b. cash c. modified accrual d. modified cash
b. cash
Janet," asks Harold, "if the company takes out a loan to make capital purchases, how would you record this?" To be correct, Janet should record the money received as a________in Assets and as a__ in Liabilities. a. debit; debit b. debit; credit c. credit; debit d. credit; credit
b. debit; credit
c. internal improvements and an assessment of past performance. d. internal improvements, an assessment of past performance, and owner objective
b. owner objectives and an assessment of past performance.
a. negotiated rent b. percentage rent c. negotiated pass-through d. percentage pass-through
b. percentage rent
If Phil prepares the expense budget properly, how should the line items in the budget be reported? a. with only codes unique to the company and to the property
b. with just enough detail to specify the identity of the item, but no more c. in sufficient detail to stand on its own without the need for further explanations d. as a full and complete report leaving out no details or any specifications
Explain two different methods for assessing modified gross lease rent increases. (page 4-9)
base year- expenses based on the year , or any other year of occupancy. base amount- base amount is a set dollar amount that is established, also called a expense stop. in this case tenant pays only their portion, called pro rata share
why is lessee documentation important ?
because it clearly entails all the details who payment information and the details of all parties involved
. Sheila works hard to ensure that spaces are vacant for as little time as possible. She also makes sure that the expense caps written into the leases are generally higher than what the tenants may prefer. Both of these efforts help to lessen the difference
between recoverable operating expenses and actual operating expenses. This difference is known as: a. attenuation. b. drawdown. c. liability. d. slippage.
Since tenants move into their spaces at different times during a particular month, the first month's rent is often prorated. Unfortunately, Elvin learns, the leases signed by
both tenants and the landlord do not contain a(n) ..blank.letter, which specifies the exact date of the lease commencement and expiration. a. adjustment b. commencement c. finalization d. habitation
What type of budget explanations are commonly required by owners?
budget variances
If Janet performs an accounting function, she will.. blank...financial data. a. classify b. identify c. interpret d. record
c. interpret
c. is forwarded to the vendor from the purchaser. d. is forwarded to the purchaser from the vendor.
c. is forwarded to the vendor from the purchaser.
Over coffee, Harold correctly informs Janet that a .Blank...building-by-building comparison of actual operating income and expenses against the budget is used to deter¬mine the success of the property manager in meeting operating plans. a. daily b. weekly c. monthly d. yearly
c. monthly
Kevin reviews the coding of invoices. The first step in this process is to: a. abbreviate the description of goods or services delivered. b. assign a vendor code from the vendor database.
c. review the budget to determine if the expense item was anticipated. d. transfer monies from accounts receivable to accounts payable.
Greg of enterprising properties to consider that when they identify an expenditure as a capital item, the expenditure ....blank.... be included in the escalatable cost pool. As such , tenants ...Blank... be charged for the costs incurred through the payment of capital items
cannot , cannot
what process should be followed in the transfer of items to a general ledger ?
cash receipts are transferred into the income accounts as credits, and the total receipts are transferred to the cash accounts as debits. cash disbursements are transferred to the cash accounts as debits, with the total disbursements transferred to the cash amount as a credit.
What is the process for transferring cash transactions?
cash transactions are transferred between the basis income statement and the balance sheet. Each transfer must affect both financial statements ,
What is the owner's equity portion of the balance sheet for a building purchased for $300,000 with a loan of $225,000? a) $525,000 b) $300,000 c) $225,000 d) $75,000
d) $75,000
(Fill in the blank) Property and facility managers should have a (an)_________ system to remind them of key deadlines and filing dates. a) management b) audit trail c) delinquency d) tickler
d) tickler
Janet, if I want to know what monies have been earned, but not yet received, by the company, what standard financial statement would I consult?" Janet responds quickly and accurately, "You would want to examine the statement." a. income b. cash flow c. accounts payable d. accounts receivable
d. accounts receivable
Day after day, Janet records debits and credits for each entry to the balance sheet. This pro- cess is referred to as accounting. a. single-pass b. double-pass c. single-entry d. double-entry
d. double-entry
At lunch, Janet tells a friend that some of the job functions she will be performing include acquiring property, paying for it, and reporting on what is acquired and paid for. "Oh," her friend correctly notes, "then you'll be involved in the....BLANK..cycle of accounting." a. asset b. control c. revenue d. expenditure
d. expenditure
remember Janet, that when we create our budget, we make a plan for the financing expenditures in the ...Blank..., says Harold
d. next year
What are some limitations associated with industry comparisons ?
data may not help plan future projects because they are generally six months old, and sometimes data is incomplete.
Prospective tenants often have taken out loans or have secured lines of credit; therefore, their creditors want to see these companies succeed (so they can pay back their debts). Creditors like to see a high proportion of owner's
equity because this equity: a. indemnifies them in lawsuits. b. cannot be replaced in bankruptcy. c. acts as a cushion in absorbing losses. d. provides the foundation for the securing of more debt.
What might cause differences in cash balance as recorded by the bank and recorded on the property's books ?
failure to account for the banks service charges will cause the bank balance to be lower than the balance on the property's books
What are methods for addressing delinquent tenant payments ?
fair but firm. understanding the difference between a delinquent tenant and a valued tenant who may have a short term cash flow.
What are the three cost types ?
fixed costs, variable costs and semi variable costs
triple net lease -
ground lease -
Bonnie follows industry practice when it comes to comparing service vendors. she promptly compares ........blank .... rates .
hourly ........ productivity rates are the total cost, divided by the number of hours it takes to do the job
Describe the benefits of percentage rent. (page 4-21)
if sales of the retail tenant increase above agreed level, the owner then may receive a percentage of those sales. plus ,kick clauses attached to a tenants percentage rent may allow a owner to terminate a lease if sales levels aren't met
What are the common objectives of capital improvements?
improving value of their asset's, and , deciding whether spending money will either help them make money or improved the assets value
When thinking about leasing costs, what considerations should be given to the market?
in a soft market the landlord may pay for all tenant space alterations as part of the lease conditions, so this must always be considered and planned especially during a soft market
Explain the tracking procedures commonly used when dealing with purchase orders
in a typical flow of a P.O, one copy goes to the vendor, one to the building,(receiving copy) one to the accounting department(the control copy) and a numerically filed copy is sent to the property or facilities manager
What specific information do these reports provide to decision makers ? (15-16)
information about available funds, vacant space , churn rate, information for new tenants, potential tenants and effects on operating budgets due to a increase or loss of rent
Bob, who works in the finance office, is reviewing the tenant files to see what they contain. While he expects the files to contain copies of leases and commencement letters, he asks Zelda if the files should contain floor plans, as well as information on keys and locks. Zelda's correct response would be:
keys and locks. Zelda's correct response would be: a. no to both. b. no to the first, but yes to the second. c. yes to the first, but no to the second. d. yes to both.
what conditions are commonly associated with rent abatements ?
lease rates may increase in later years to compensate for the earlier free rent, the rent abatements may only apply to base rents and not other operating expenses such as electricity
When calculating an increase over the expenses in the year of occupancy or any other year, this period is known as the base year. In lieu of using operating costs from a particular year of operation, some
leases provide for a set dollar amount to be established as the base amount. This amount is also called an expense stop. In each case, tenants pay only their portion (called the pro rata share) of the incremental increase over the base amount.
How are debits and credits applied to fundamental accounting equation ? (11-12)
liabilities and owner's equity normally have a credit balance a credit entry will increase the liability or owner's equity and a debit entry will decrease the liability or owner's equity
when undertaking the process of lifecycle costing for a capital project, which consideration should be made?
life expectancy, inflation rate, real interest rate, all initial expense factors, on going expenses and discount rate
for accounting purposes, costs are segregated . The major reason for setting up various cost accounts are to establish a basis for pricing and to enable management to ......blank .... cost excess
localize
Which factors influence success ratio projections for lease renewals ?
market conditions, owners expectations and assessments of past performance all influence projections for lease renewals
A high turnover indicates good merchandising, and from a working capital point of view, a company with a high turnover requires a smaller investment in inventory than one producing the same sales with low turn over rate
merchandising inventory turnover is calculated by dividing costs of goods sold by average inventory
What are typical components for inclusion in a capital plan ?
money for aesthetic improvements, energy-efficiency investments, and major equipment replacements. these are the types of items usually included in 5 year capital planning
What recourse do owners have when they are made aware of the budget variance ?
most have alternative investment strategies that can be implemented at the first sign of trouble. the goal of both owner and property manger is to increase value of the property so all variances should be communicated immediately
How are the invoice approval levels determined ?
most often based on amount of the invoice. the higher the cost of something, the higher the level of approval
The owners of Best Properties have to revise the operating budget of the mall; that is, they are considering cuts that will enhance the financial performance of the mall. Cutting only proposed capital expenditures that are not immediately
needed for effective operation, safety, and the value of the property is generally considered to be: a. ideal. b, illegal. c. necessary. d. dangerous.
What are the components of the formula for net present value ?
net present value (NPV) = present value(PV) - investment (I)
Explain the practice of checks and balances . (4)
procedures put in place to ensure to different individuals perform different roles and functions help ensure checks and balances. those who authorize payments, should not be the same people who issue checks or mail them
What are internal reporting needs common to the real property industry?(20)
property industry internal reporting includes , tenant collections, vendor payments, and monthly operating results.
What are the functions of a purchase order?
provides assurance to the vendor and the purchasing entity that the expenditure has been approved by a authorized individual
Which elements should be considered when comparing vendors ?
quality of team, background, stature, experience, demonstrated experience in relationship to project, evidence of innovation, track record, quality of response , pricing model
Which key components make up the bookkeeping process? (2)
recording and classifying transactions is known as bookkeeping.
How is prorated rent applied to the commercial real estate industry
rent is prorated for the number of days within that month that the tenant was not in the space.
What are tenant and property reports commonly created with information contained in lease abstract
rent roll, stacking plan, tenant profile, reminder notices, stopped rent report and lease expiration report
what ratios are often used to determine earning power of a company
return on equity earnings per share common size comparative statements
Describe the accounting cycle types most common to commercial real estate management business (5)
revenue cycle and the expenditure cycle
in budgeting the base rent for tenants of her strip mall, Bonnie the property manager will have her staff start by ,
scheduling the base rents monthly for each existing tenant .
Scenario - Chapter 3 . If Miguel has learned anything over the many years he has managed properties, it's the following: Whenever there's a problem or a tenant complaint, always go to the lease document. Tenants at his office building sometimes assume, and expect,
services either not mentioned in the lease or specified differently in that document. While he is patient and willing to work with tenants, he relies on the exact wording of the lease document. In essence, this provides security for
what are some casues for slippage?
tenants with semi grosse leases will have base amounts that are not exceeded by the escalatable cost pool. other tenants may have expense caps written into leases
Before Sheila begins budgeting income, she first must update the rent roll. A variety of influences affect the status of the rent roll. However, in terms of updating the rent roll,
she need not concern herself with: a. new leases not yet abstracted. b. changes to space requirements. c. results of tenant satisfaction surveys. d. changes to the terms of existing leases.
When developing an RFP, which requirements should be kept in mind to ensure the most useful information is obtained from potential vendors
should be as specific and detailed as possible in outlining the requirement and open ended questions may be valuable, but a baseline will be needed to enable objective comparison of vendor proposals
How should variances be communicated to the owner ?
should be explained each month and explained in a variance analysis
When looking to revise a budget, which items should owners and building management consider?
should look to revise capital budget expenditures, but often they look towards day to day operating budgets
What are the different type of net lease types ?
single net, double net and triple net leases, absolute net which is similar to triple net and ground lease
What is slippage ?
slippage is the difference between recoverable operating costs and the actual operating costs
Why is there a good need for lease interpretation ?
so that the tenant fully understands their responsibilities to the landlord and to avoid any misunderstandings, financial or other
What are common types of prepaid expenses ?
taxes, insurance and contracts for maintenance and service of equipment
What common means are used for notifying tenants of billings?
tenant reminder notices. not an invoice, simply monthly reminder notices
Scenario - 14 Hilda is property manager at a suburban office complex owned by Peachtree Real Estate. She is in receipt of the several financial statements assembled by Peachtree's finance staff. The previous property manager did not properly analyze tenant financial statements and had several
tenants unable to pay their rent, causing Peachtree to lose money. Hilda is committed to do better. She will take advantage of the methods available to her to predict prospective tenants' ability to generate income, assess their liquidity, and evaluate their ability to meet their long-term obligations.
When estimating utilities expenses, what resources are available to the property or facilities manager?
the combination of operating history, projected occupancy changes, building specifications, and anticipated changes to utility rates should provide reasonably accurate estimate of utility costs
What is needed to the true average as it is presented in the BOMA experience exchange report ?
the measure of true average in that it measures the costs or income per square foot without referring to the number or size of the buildings contributing data. total dollars/total square ft = average dollars per sq ft.
what is needed to determine the median as it is presented in the BOMA experience Exchange Report
the median is a true measure of the midpoint of data. to obtain the median for the ten sets of data. counting the number of items in the data, the median is the number halfway through the the data.
What are the functions of the mid-range data as it is presented in the BOMA experience exchange report?
the mid range indicates the middle 50 percent of the data. The low mid range figure is the number below which 25 percent of the data items lie, and the high mid range figure is the number above which 25 percent of the data items lie
What causing cost variation ?
the most typical factor causing cost variation is occupancy. cleaning , maintenance and utility costs all vary when occupancy changes
How is sample size determined for the data compared in the BOMA experience exchange report ?
the number of buildings is used as the sample size. Therefore the more number of buildings in the sample size, the more accurate the information will probably be
debt service ratio is ?
the number of times debt can be paid from income
what is debt service ratio?
the number of times debt service can be paid from income, and measures the security of the return offered to bondholders or a mortgage holder
What is meant by the term responsibility budgeting?
the preparation of a portion of the budget along with the explanation for any budget variances, by the individual or individuals responsible for that portion of the budget
Best Properties would have used a as a projection of the expenses of the property over time, and it would continue to monitor the operation of the property to ensure that
the projections made during investment analysis are met or exceeded. a. survey b. pro forma c. title search d. two-step mortgage
What items are included in the tenant file? (11)
the tenant file houses the most current correspondence, leases and other documents. a copy of the lease , lease abstract, rent roll, lease amendments, floor plans, keying information, security deposits, insurance information or anything related to the tenant
-what are the services required, which can be eliminated, what needs to be added, has occupancy changed , what's include din lease agreements
then determine upcoming contracts for the next year
congress effected the modified cost recovery system increasing the useful life of commercial non residential property to 39 years
these are all dependent on the date the asset was put into service
What alternative strategies might a building professional use to review data presented in the experience exchange report
they can review the description types of data included in each summary and expense detail line item to determine the composition of each , then comparing that description to similar information for the charts of accounts used instead of BOMA
Which procedure should the building professional follow when recording rent that has been deemed uncollectible ?
they should be offset against the reserve for uncollectible rents or recorded as bad debt expense
What standards should be put in place when processing invoices ?
they should be received, date stamped and matched with the appropriate P.O. and discrepancies between P.O price and invoice price should be resolved before invoice is processed. originals should be used where possible for payment
which elements are typically tracked with the use of a tickler system (14)
tickler system is a system that reminds them of important deadlines and filing dates. Lease changes, billing info, dues dates, corporate reporting dates , accounting cutoff dates all maybe monitored by tickler system
What are the typical time frames in which an expense budget is prepared ?
time frame corresponds with the frequency required by the owner, and in most cases this is monthly, because actual expenses are generated monthly
Why is invoice coding needed?
to ensure that the wrong contractor isn't being paid out of the wrong account or for the wrong service
What is the primary function of a lease ?
to protect the interests of both parties , the landlord and the tenant.
What are methods for reporting escalatable costs? (page 4-14)
to review the expense amounts to ensure that each category contains a full 12 months of activity.
in keeping with generally accepted practice, and unless otherwise stated . Greg correctly insists that rent and other charges to tenants begin , when ?
upon occupancy, and not on the first day of the month unless occupancy is the first day of the month
What are the components commonly tracked in a vendor data base ?
vendors legal name, remittance address, federal tax I.D number, minority status and entity type. a unique number is then assigned to each vendor
. While Kevin is satisfied with the quality of the service provided by the cleaning ven-dors, he is concerned about the cost. He therefore is going to submit RFPs to various cleaning vendors. It is generally recommended that RFPs be delivered to no more than
vendors to ensure proper consideration. a. one or two b. three to five c. six to eight d. nine to 12
What are common offsetting variables in a budget comparison
weather and seasonal changes may be common offsetting variables and may affect utility costs or outdoor maintenance costs. variance explanation provide additional explanation regarding operating variances
How do identified budget variances impact budget revisions ?
when actual income or expense vary from the budgeted amount. a favorable variance indicates that the "income" exceeded the budget , while a negative variance indicates that "expenses" exceeded the budget. these variances assist in future budgeting
which procedures should be put in place for recording the expenses associated with supplies purchased ?
when supplies are used in the operation of a property, the applicable cost value is transferred from the balance sheet to the cash basis income statement , thus reducing the balance of recorded supplies.
when the number of data is a odd number, the median is the middle one.
when the data is a even number, the two middle numbers are are added together and divided by two to produce the median
How do companies make use of working capital?
working capital enables a company to carry sufficient inventories, meet current debts, take advantage of cash discounts and extend favorable terms to customers.
What are the standard time frames in which building and property expenses should be recorded
you should record it in the time frame when the expenses to place. so cleaning expenses for the month should be accrued in that month. This is known as accrual basis accounting
When reviewing contract expenses, to what should building professionals pay close attention too?
zero base budgeting may be used, managers have to ask
