8. Intro To Company Financial Statements

Question 1

Accountants preparing financial statements need to maintain up to date knowledge of…

Answer 1

The companies act 2006

Financial Reporting Standards (FRSs)
OR
International Accounting standards (IFRSs)

Companies FS must be prepared in accordance with the CA & either FRS (uk reporting standards) or IASs

Question 2

IAS2

Answer 2

Inventories

Question 3

IAS16

Answer 3

Property plant and equipment

Question 4

IAS 1

Answer 4

Title “Presentation of financial statements.”

Required to fair representation and compliance with IFRS (international financial reporting standards)

Question 5

As part of Fair Representation IAS 1 requires

Answer 5

• select and apply accounting policies
• present info so as to provide relevant, reliable, comparable, understandable info.
• where necessary provide additional info to enable users to understand particular transactions.

Question 6

Accounting policies cover specific accounting methods selected by directors eg

Answer 6

Inventories valuation

Depreciation of PPE

Question 7

IAS 1

(Some) Requirements for the SPL

Answer 7

Expenses to be analysed

by nature (raw materials, employee costs, depreciation etc)

Or by function (Cost of sales, distribution costs, admin expenses)

Most detail is summarised eg. Sales rev. includes sales returns

Question 8

Statement of Changes in Equity (follows SPL)…

Answer 8

Shows how profit is added to the brought forward a lance of Retained Earnings (profit from earlier years) while dividends are deducted.

The updated balance of retained earnings is shown in the SFP as a reserve of the company.

Question 9

IAS 1 -

Shows items to be shown on face of SFP as a MINIMUM. (Does not state order)

Answer 9

PPE (shown at carrying amount).
Intangible assets eg. Goodwill (Shown at carrying amount).
Inventories.
Trade and other receivables.
Cash and cash equivalents.
Trade and other payables.
Tax liabilities.
Issued capital and reserves.

Question 10

The companies act 2006 sets out…

Answer 10

…the responsibilities of directors for keeping accounting records and preparing and presenting financial statements.

Question 11

IAS requires that companies comply with the accounting principles (concepts) of…

Answer 11

Going concern
Accruals
Materiality

Question 12

Directors of a company select accounting policies so as to…

Answer 12

...provide info that is:
Reliable (verifiable)
Relevant (timely)
Comparable 
Understandable

Question 13

IAS 1
SFP doesn’t have to show detail
A typical trading co would have…

Answer 13

Revenue
CoS
Distribution costs
Admin expenses
Finance costs
Tax expense 

Prob show subtotal ‘Profit/(loss) from Operations’
Then finance cost amount.
Then subtotal ‘Profit/(loss) before tax’
Then Tax expense amount.
Then final ‘Profit/(loss) for the year attributable to equity holders’