Ch 3 Recordings - Company Financial Statements Flashcards
Which accounting standard requires all 5 financial statements?
IAS1 - Presentation of Financial Statements
What are the x5 components of Financial Statements?
1) Statement Of Financial Position (& notes).
2) Statement Of Profit & Loss (& other comprehensive income).
3) Statement Of Changes In Equity.
4) Statement Of Cash Flow (& notes).
5) Notes to Financial Statements.
What is a SOFP?
Statement of Financial Position
Summary or list of all ASSETS & LIABILITIES of the Ltd company at the end of the accounting period.
What are NCA?
Non-Current Assets
> 12m - Long term use & not resold as part of the trading activities.
Buildings/Vehicles (Motor vehicles) /Plant & Machinery/ Goodwill (& other intangible assets e.g. patents)/Investments
What are Current Assets?
Current Assets
<12m - Assets expected to be realised in the business in the normal course of trading.
Inventories/Prepayments/Trade & Other Receivables/Cash & Cash Equivalent.
What are NCL?
Non-Current Liabilities
> 12m - Liabilities being paid off over a period exceeding 12m from the reporting date.
Bank Loans/Long Term (provisions) Loan (Debentures).
What are Current Liabilities?
Current Liabilities
<12m - Short term payables of the business which are due to be paid within 1 year of the reporting date.
Trade & Other Payables/Taxation Payable/Bank Overdrafts
What is a SOPL?
Summary of INCOME & EXPENSE for a period usually 12m to calculate the profit or loss.
What is a Trading Account?
Calculates the GROSS PROFIT or LOSS that has been made from trading activities.
Buying and selling goods or services.
How is NET profit/loss worked out?
It is arrived at by deducting all expenses of the business from the gross profit.
GROSS PROFIT
(ALL EXPENSES)
=NET PROFIT/LOSS
What are the Proforma titles (across the top) for SOCIE?
Share Capital, Share Premium, Revaluation Reserve, Retained Earnings, Total
What are the Proforma side titles for SOCIE?
@ 1 Jan 20X2 - X in each section Total Comprehensive Income - X (RevR) X (RE) Dividends - X (RE) Share Issue - X (SCap) X (SPrem) @ 31 Dec 20X2
What is the Proforma for Equity in the SOFP?
Share Capital - Rec from S.holders, initial investment
Share Premium Account - Ditto^
Retained Earnings - Acc P&L SHold not yet distributed
Revaluation Reserve - Excess of PPE other than c/v
Statement shows how the final figures of EQUITY in the SOFP have changed from the previous year.
What are the advantages of being a Company rather than a Sole Trader?
1) Separate Legal Entity - Distinct from owners
2) Limited Liability - Max loss shares held
3) Easier to raise finance - Sell shares or easier to get a loan liability is limited.
4) Perpetual Succession - Company will still exist even if the Director/Owner dies.
What are the disadvantages of being a Company rather than a Sole Trader?
More regulation (but protects shareholders due to Companies Act 2006).
What is a Private Limited Company?
1) A Limited Company.
2) Cannot sell shares publicly.
Min No of Shareholders - 1
Min No of Directors - 1
Can be exempt from Audit if they meet SMALL COMPANIES criteria.
What is a Public Limited Company?
1) PLC
2) On the Stock Exchange.
3) Sell shares to the public.
4) Have to follow the London Stock Exchange rules & UK code of corporate governance.
Min No of shareholders - 2
Min No of Directors - 2
Can they be exempt from Audit - No
What are Sole Trader:
Legal Requirements?
Tax requirements?
Borrowing Requirements?
No legal requirements for FS, may find it useful for financial performance. Have a section in the SOFP called CAPITAL.
Pay INCOME TAX on a share of the TAXABLE PROFITS.
Can borrow from the BUSINESS ACCOUNT = DRAWINGS. If the account runs into an overdraft the owners are personally liable for the debt.
Can use the Business Bank Account for personal use.
What are Limited Companies:
Legal Requirements?
Tax requirements?
Borrowing Requirements?
Legal requirements to prepare FINAL ACCOUNTS annually inline with relevant accounting standards IFRS (if adopted) = IAS1.
Pay CORPORATION TAX on TAXABLE PROFITS - Charged on P&L as an expense.
Directors only can sometimes WITHDRAW cash from the Company provided it is within the limits set out in Companies Act 2006.
Double Entry
DEAD
Dr
Expense
Asset
Drawings
Double Entry
CLIC
Cr
Liability
Income
Capital
E.g. of notes to accts will details the total Intangible NCA in the SOFP
20XX (Right Aligned) £000 (Right Aligned) Development Costs X Concessions, patents, licences & trademarks X Goodwill X =Total X
