5.3 Business Accounts: Company Accounts

Question 1

Why does a declared and paid final dividend affect retained earnings in BS

Answer 1

Reduces profits carried forward in P+L

Question 2

What account is used to fund a bonus issue of shares

Answer 2

RE/Premium Account

Question 3

How is the bottom 1/2 of BS for company different from ST/P

Answer 3

Consists of share capital, reserves and retained earnings

Question 4

If final dividend has not been approved by Ms yet, what is the effect

Answer 4

Only proposed and not enforceable, so does not show on SoCiE

Question 5

How does a loan affect BS

Answer 5

Adds to liabilities + current assets

Question 6

Where do Retained Earnings in bottom 1/2 of BS come from

Answer 6

SoCiE

Question 7

How do interim dividends appear on SoCiE

Answer 7

As declared (paid) dividends

Question 8

What is impairment in company P+L account

Answer 8

Provision for DDs

Question 9

What happens if investment is written down

Answer 9

Reduce value of asset + reduction = expense in P+L

Question 10

Two kinds of dividends

Answer 10

Final or interim

Question 11

Why should net assets always balance w/ total equity

Answer 11

Assets represent manner equity is being used

Question 12

If final dividend declared but not paid, what is the effect

Answer 12

Shows on SoCiE + BS as current liability (bc enforceable)

Question 13

Where are dividends recorded

Answer 13

Statement of Changes in Equity

Question 14

How are the reserves in BS split

Answer 14

Capital + revenue

Question 15

How do unpaid preference shares show on accounts

Answer 15

In SoCiE to calculate Retained Earnings, and as current liability in top hold of BS (as not paid yet)

Question 16

Three main differences between company accounts, and ST/P

Answer 16

Tax, dividends and bottom 1/2 of BS

Question 17

What is the effect of including something as an expense in P+L on BS

Answer 17

Reduces Retained Earnings when transferred across

Question 18

If profits are not paid in a dividend, what happens

Answer 18

They are retained

Question 19

What makes up the revenue reserves

Answer 19

Retained earnings

Question 20

How do you work out the cash generated by share issue

Answer 20

Times shares issued by their nominal value

Question 21

What are investments in ALCIE

Answer 21

Assets

Question 22

Why is tax different for a company compared to ST + P

Answer 22

Company pays corporation tax

Question 23

What kind of reserve account can be distributed as dividends

Answer 23

Revenue reserves

Question 24

Why do interim dividends only show on accounts if actually paid

Answer 24

Bc can be rescinded before it is paid

Question 25

What are long-term liabilities called in company P+L account

Answer 25

Non-current liabilities

Question 26

What are reserves in bottom half of BS

Answer 26

Capital in excess of called up value of issued share capital

Question 27

What is a revaluation reserve (in bottom half of BS)

Answer 27

Ds show up-to-date value of non-current assets, as top half for net assets has increased

Question 28

Example of capital reserve

Answer 28

Share premium account

Question 29

How does an interim dividend show on accounts

Answer 29

Shows on SoCiE

Question 30

When can companies declare dividends

Answer 30

If they have profits available for the purpose

Question 31

When would the capital reserve account go up

Answer 31

When shares issued at a premium

Question 32

If final dividend declared and paid, what is the effect

Answer 32

Only shows in SoCiE, but affects retained earnings in BS

Question 33

When do interim dividends show on accounts

Answer 33

If actually paid

Question 34

Where are dividends recorded and why

Answer 34

In SoCiE as capital, between business + owners

Question 35

What is the ratio when issuing bonus shares

Answer 35

X (shares ISSUED): Y (shares CURRENTLY held)