Published Financial Statements of Limited Companies Flashcards
(24 cards)
What is the main role of the directors of a limited company?
The role of Directors of a limited company is to ensure that the provisions of the companies acts which relate to the accounting records are followed.
What are the main provisions of the companies act which relate to the accounting records?
Accounting records must show and explain the company’s transactions and ensure that the company’s statements give a true and fair view of the company’s financial position.
A company’s accounting records must detail all of the assets and liabilities, details of inventories and day-to-day transactions.
Ensure the statements are prepared in accordance with the comapnies act.
What is the objective of IAS 1?
The objective of general purpose financial statements is to provide information about the financial position and cash flows of an entity that is useful to a wide range of users in making economic decisions.
What accounting concepts does IAS 1 require compliance with?
Going concern
Accruals concept
Materiality
Offsetting
Frequency of reporting
Compartive information
What items does IAS 1 require to be detailed on the face of the statement of profit or loss and other comprehensive income?
Revenue, finance costs, tax expense, other comprehensive income (revaulation of property)
How to calculate cosst of sales?
Opening inventories + Purchases - Purchases returns - Carriage inwards - Closing Inventories.
What are dividends, how many times a year are they paid?
Dividends are distributions to shareholders who own the company as a return on their investment.
Paid twice a year, interim dividend and final dividend.
However only the dividends paid in the actual financial year are included on the financial statements.
Name 2 fundamental qualitative characteristics?
Relevance and Faithful Representation
Name 4 enhancing qualitative characteristics?
Timliness
Comparability
Verifiability
Understandability
What is a bonus issue?
Extra issue of shares to exisiting shareholders at no cost. A bonus issue does not raise additional finance for the company, it simply is a means of reclassifying reserves as share capital.
Which account is used to make a bonus issue and why?
Share premium account as the reserve is non distributable.
What is the double entry to record a bonus issue?
Debit - Share premium
Credit - Share capital
As they are both liability accounts, credit is an increase and debit is a decrease
Retained earnings will also decrease by the same amount share capital has increased by
How to work out the new shares issued for a bonus issue which is 1 for 4 bonus issue?
Share capital / 4
What is a rights issue?
A rights issue is an issue of shares to existing shareholders at below market value.
Advantages of a rights issue?
Cheap and convienient way of raising capital and cuyrrent shareholders retain control as its easier to sell to these shareholders then find new ones.
Whats the double entry to record a rights issue?
Debit - Bank
Credit - Share capital
Credit - Share premium
What is the double entry to record an increase in value of a non current asset?
Debit - Non current assets
Credit - Revalutation reserve
Also the value is then added onto the statement of profit r loss and other comprehensive income.
If an asset is revalued by £2 million to £4.5 million, how will this be shown on the financial statements?
The PPE value will be increased by 2 million, however the accumulated depreciation will be the balance from the TB + the decpreciation charge of the new revalued amount only (4.5 million).
If depreciation is apportioned between cost of sales, distribution and admin expenses will this be a plus or a minus on the total of these expenses?
Plus
How does a revaluation affect PPE on the SFP
Land and Buildings - Cost figure - TB
+ Diff between old amount and revalued amount
+ Depr charge - TB
+ New Depr charge figure
Remember when calculating depr to minus the new revalued land amount away from the new land and buildings at cost figure
Whats included in trade payables working?
Trade payables + Accruals balance from TB
What are the deadlines for filing statutory accounts with the registrar of companies for a private limited company and a public limited company?
Nine months and six months respectively
How to calculate the buildings depreciation if land has been revalued?
Land and Buildings - TB figure
- Land included in trial balance
