9 - BL - accounts Flashcards
When are long term liabilities due to be repaid?
In one year or more
What is a bad debt?
A debt is a ‘bad debt’ when a business knows with certainty that it is never going to receive it.
What is a doubtful debt?
A doubtful debt occurs when a business is providing for the possibility that a debt or debts may not be paid
How are doubtful debt provisions treated in the balance sheet?
Its nature, and effect on the Balance Sheet, is most similar to that of a liability account and it is treated as such, because the amount of assets available to the business is reduced by the amount of the provision
What does the capital account of a partner in a partnership represent?
The original capital introduced by them
What does the current account of a partner in a partnership represent?
The capital available for withdrawal at the partner’s discreation
When must a private company file accounts at company’s house?
9 months after the APE
When must a public company file accounts at company’s house?
6 months after the APE
Where is tax shown in a company’s accounts?
The Profit and Loss Account of a company includes a statement of the tax the company should pay on its profits.
Where are dividends shown?
Statement of Changes in Equity (SoCiE). This shows profits brought forward and added to current year profits subject to any deductions for dividends
Can private companies issue bonds to the general public?
No - only targeted investors
What is a debenture?
Any form of debt security issued by a company
AND
A document which creates security. The loan agreement sets out the terms of the loan, and the debenture sets out the details of the security.
What does a fixed charge mean for the borrower
creditor can control what the security provider can do with the fixed charge assets. Borrower can still use the asset generally but cannot dispose or charge it.
What does a floating charge mean for the borrower
whatever assets in that class are subject to floating charge. Security provider can dispose of the assets until crystallization (fixes the assets in relevant class and creditor acquires control)
What is a debt security?
a type of debt - e.g. a bond
What is a security on a debt?
something that the lender will take over the assets of the borrower in order to protect their interests.
What is a “representation”?
A statement of fact as to legal and commercial matters, it is made on signing an agreement and repeated periodically during the life of the loan.
When must a charge be registered?
within 21 days beginning with the day after the charge is created.
Where must a charge be registered?
With companies House
Who can register a charge?
Either the borrower or the lender
What are the implications of not registering a charge?
the charge is void against a liquidator, administrator or any creditor of the comapny;
and
the debt becomes immediately payable
What is the order of priority between creditors
- Creditors with fixed charges - entitled to the first call on the proceeds from the sale of those assets charged to them under a fixed charge.
- Preferential creditors – primarily wages (up to £800 per employee), occupational pensions and certain sums owed to HMRC.
- Creditors with floating charges (which will have crystallised, if not before, upon commencement of the winding up). For floating charges created on or after 15 September 2003, a proportion of the proceeds of the floating charge assets will be set aside for payment to unsecured creditors. This is commonly referred to as the ’prescribed part fund’.
- Unsecured creditors, to the extent not paid off from the prescribed part fund.
- Shareholders (according to the rights attaching to their shares).
Generally, if two people have a fixed charge over a fixed of floating asset, the earliest charge wins. Can the debtors re-arrange this?
Yes - The creditors can allow for a different ordering via a a Deed of Priority, an Intercreditor Agreement or a Subordination Agreement.
Where is the premium paid on shares shown in the balance sheet?
Share premium account
What are debits in a trail balance?
Assets and expenses
What are credits in a trail balance?
liabilities and income
What is straight line depreciation
Same amount is deducted each year for depreciation
What is reducing balance depreciation
Same percentage is deducted each year which will mean that a different amount is depreciated in each year (more in early years, less in later years).
