5.3 Business Accounts: Company Accounts Flashcards
Why does a declared and paid final dividend affect retained earnings in BS
Reduces profits carried forward in P+L
What account is used to fund a bonus issue of shares
RE/Premium Account
How is the bottom 1/2 of BS for company different from ST/P
Consists of share capital, reserves and retained earnings
If final dividend has not been approved by Ms yet, what is the effect
Only proposed and not enforceable, so does not show on SoCiE
How does a loan affect BS
Adds to liabilities + current assets
Where do Retained Earnings in bottom 1/2 of BS come from
SoCiE
How do interim dividends appear on SoCiE
As declared (paid) dividends
What is impairment in company P+L account
Provision for DDs
What happens if investment is written down
Reduce value of asset + reduction = expense in P+L
Two kinds of dividends
Final or interim
Why should net assets always balance w/ total equity
Assets represent manner equity is being used
If final dividend declared but not paid, what is the effect
Shows on SoCiE + BS as current liability (bc enforceable)
Where are dividends recorded
Statement of Changes in Equity
How are the reserves in BS split
Capital + revenue
How do unpaid preference shares show on accounts
In SoCiE to calculate Retained Earnings, and as current liability in top hold of BS (as not paid yet)
Three main differences between company accounts, and ST/P
Tax, dividends and bottom 1/2 of BS
What is the effect of including something as an expense in P+L on BS
Reduces Retained Earnings when transferred across
If profits are not paid in a dividend, what happens
They are retained
What makes up the revenue reserves
Retained earnings
How do you work out the cash generated by share issue
Times shares issued by their nominal value
What are investments in ALCIE
Assets
Why is tax different for a company compared to ST + P
Company pays corporation tax
What kind of reserve account can be distributed as dividends
Revenue reserves
Why do interim dividends only show on accounts if actually paid
Bc can be rescinded before it is paid
What are long-term liabilities called in company P+L account
Non-current liabilities
What are reserves in bottom half of BS
Capital in excess of called up value of issued share capital
What is a revaluation reserve (in bottom half of BS)
Ds show up-to-date value of non-current assets, as top half for net assets has increased
Example of capital reserve
Share premium account
How does an interim dividend show on accounts
Shows on SoCiE
When can companies declare dividends
If they have profits available for the purpose
When would the capital reserve account go up
When shares issued at a premium
If final dividend declared and paid, what is the effect
Only shows in SoCiE, but affects retained earnings in BS
When do interim dividends show on accounts
If actually paid
Where are dividends recorded and why
In SoCiE as capital, between business + owners
What is the ratio when issuing bonus shares
X (shares ISSUED): Y (shares CURRENTLY held)
