Company Financial Stmts

Question 1

What is the format of financial statements prescribed by?

Answer 1

IAS 1 Presentation of Financial Statements

Question 2

What makes up a complete set of statements in accordance with IAS1?

Answer 2

• stmt Financial Position
• Stmt of profit or loss and other comprehensive income
• stmt of changes in equity
• stmt of cash flows
• Notes, summary of significant accounting policies and other explanatory notes

Question 3

Where does profit for year from P/L go?

Answer 3

To Retained Earnings
- in stmt change in equity
- stmt FP

Question 4

How else can Non-Currently Assets be referred to?

Answer 4

• long term
• fixed

Question 5

What is the difference between how assets are shown in Sole traders stmts vs Companies?

Answer 5

• same however only show Carrying Amounts, detail in notes

Question 6

If Current Assets > Current Liabilities what is the excess called?

Answer 6

• working capital
• net current assets

Question 7

What are the criteria to be classified as current asset?

Answer 7

1. to be realised within 12 months (most important)
2. to be realised/held for sale in normal operating cycle
3. primary purpose to be traded
4. cash/equivalent and not restricted

Question 8

Operating Cycle of a Company

Answer 8

time between acquisition and realisation in cash/equivalent

Question 9

What are the criteria for current liabilities?

Answer 9

1. to be realised/due within 12 months
2. settled within entity’s normal operating cycle
3. for purpose of trading

others include bank overdraft, income taxes

Question 10

How else are retained earnings described?

Answer 10

= Revenue Reserve
= Accumulated Profits
= Undistributed Profits
= Unappropriated Profits

Question 11

Why are Retained Earnings particularly important if the company make a loss one year?

Answer 11

previous retained earnings from when profit was made can be used to paid dividends still

Question 12

What does a debit balance on retained earnings account mean?

Answer 12

• company has accumulated losses
• very occasional

Question 13

What is included in stmt of profit or loss and other comprehensive income?

Answer 13

• all realised and unrealised gains/losses in one statement of performance

Question 14

Realised gains/Losses

Answer 14

• have happened in year
• profit for the year

Question 15

Unrealised Gains/ Losses

Answer 15

• not happened yet, not retained earnings, not real
• revaluation gains

Question 16

How can Statement of Profit or Loss and other comprehensive income be presented?

Answer 16

• as a single statement, other comp income added on at bottom after Profit for year
• as two separate statements with profit for year brought into comp income

Question 17

What is the layout of Other Comprehensive Income?

Answer 17

….Profit for year
Other Comprehensive Income
Gains on Property Revaluation

Total comprehensive income for year

Question 18

Where is property revaluation shown in stmts?

Answer 18

• Other Comprehensive Income
• Changes in equity

Question 19

What is the point of stmt of changes in equity?

Answer 19

• shows movements in entity’s equity for the period
• how/why got from last years equity to this years

Question 20

What accounts may be included in the changes of equity stmt?

Answer 20

• share capital
• share premium
• retained earnings
• revaluation surplus
• any other reserves
• total

Question 21

What are the events that may be included in stmt of changes in equity?

Answer 21

• issue of share capital
• dividends
• total comprehensive income ( can be split between profit/other comp income)
• transfer to retained earnings

Question 22

When would a transfer from revaluation surplus to retained earnings be allowed?

Answer 22

Under IAS 16
- annually the difference between depreciation calculated on revalued assets and historic cost depn can be transferred- as revalue is only estimate, cost is still real value
- on disposal, balance on revaluation surplus can be transferred

Question 23

What is the double entry for transfer from revaluation surplus to retained earnings?

Answer 23

DR Revaluation Surplus
CR Retained Earnings

Question 24

What is the point of Notes in financial statements?

Answer 24

• provide more detail to users of accounts
• on the face only want as little detail while still complying with standards

Question 25

What should a note for tangible non-current assets include?

Answer 25

reconciliation of opening/closing amounts at begin/end of period For all different categories- land/buildings, machinery, plant, office equipment Carrying amount at begin period Additions Revaluation Surplus Depreciation Chg Disposals Carrying Amounts at end of period Current years: Cost/Valuation Accumulated Depreciation Carrying Amounts Last years: Cost/Valuation Accumulated Depreciation Carrying Amounts

Question 26

What should also be disclosed/written in note for Tangile NCA for property, plant and equipment?

Answer 26

- accounting policies For each class - depreciation methods - useful lives/depreciation rates - total depreciation - gross amount on depreciable assets and related accumulated depn at begin/end

Question 27

What should also be disclosed/written in note for Tangile NCA for revalued assets?

Answer 27

- effective date - independent valuer involved? - carrying amount for each class that would have been included had asset been carried at cost less depn - revaluation surplus

Question 28

What should be included in a note on intangible non-current assets?

Answer 28

For all classes- development expenditure Carrying amount at begin additions Amortisation charge Disposals Carrying amount at end of Current Years: Cost Accumulated amortisation Carrying amount Previous years: Cost Accumulated amortisation Carrying Amount

Question 29

What written disclosure notes need to be included with intangible NCA?

Answer 29

- accounting policy for each class - method of amortisation - useful life/amortisation rates - gross carrying amount, accumulated amortisation - accumulated impairment losses at begin/end- fall in value - carry amount of internally generated intangible assets - line of P/L in which amortisation is included

Question 30

What should be included in a note for inventory?

Answer 30

Raw materials Work in Progress Finished Goods Total

Question 31

What should be included in note on provisions?

Answer 31

Movement provisions at begin Increase in provision in period Released in period (amount used) end of period for each class that would - disclosure of background - uncertainties - nature of provision - expected timing - major assumptions - expected reimbursements - whether any asset recognised for above

Question 32

What should the note on contingent liabilities contain?

Answer 32

unless remote - description of nature - estimate of financial effect - uncertainties - amount/timing - possibility of reinbursement

Question 33

What should the note on contingent assets contain?

Answer 33

Where inflow of economic benefit probable: - description of nature estimate of financial effect

Question 34

What should a note on events after reporting period include?

Answer 34

for non-adjusting events after reporting period - nature of event - estimate of financial effect

Question 35

what does IFRS 15 explain?

Answer 35

Revenue from Contract with Customers - how revenue should be recognised - recognised when there is a transfer of control

Question 36

When can revenue be recognised as transfer of control?

Answer 36

- from entity supplying to customer - entity has present right to payment for asset - customer has legal title to asset - entity has transferred physical possession of asset - significant risks/rewards of ownership have been transferred to customer has legal