Chapter 10 - Accounting

Question 1

What are objectives of accounts?

Answer 1

• To summarise results of transactions to help management run the company
• To report to interested parties the state of affairs of the company and enable analysis of the company by them

Question 2

In accordance with what act what must large companies provide annually?

Answer 2

in accordance with the companies act 2006:
o	Income statement 
o	Balance sheet 
o	Director’s report 
o	Auditor’s report 
o	Cash flow statement 
o	Statement of changes in equity

Question 3

In accordance with what act what must listed companies provide annually additionally?

Answer 3

in accordance with the companies act 2006:

o Must also produce half-yearly interim reports

Question 4

What are small and medium sized companies exempt from?

Answer 4

Small and medium-sized companies are exempted from delivering full annual financial statements to the Registrar of companies and file abbreviated financial statements

Question 5

What constitutes a small company?

Answer 5

Must satisfy two or more of the following criteria:

• Turnover = less than £10.2 mill
• Balance sheet total = less than £5.1 m
• Average number of employees = less than 50

Question 6

What constitutes a small company?

Answer 6

Must satisfy two or more of the following criteria:

• Turnover = less than £36 mill
• Balance sheet total = less than £18 m
• Average number of employees = less than 250

Question 7

What are the two legal categories of organisation?

Answer 7

Bodies sole

Bodies corporate

Question 8

What is a bodies sole?

Answer 8

Sole trades and partnerships which have no legal requirements to produce accounts

Question 9

What are bodies corporate?

Answer 9

All other forms of organisation that aren’t bodies sole - these are recognised by law as being a legal entity seperate from their owners

Question 10

How is a company formed

Answer 10

Is a body corporate and is a legal entity formed by the companies acts

Question 11

what are the two classes of company whose liability is limited by shares? & describe these

Answer 11

• A public company - is defined by the companies act as one that has minimum issued share capital of £50,000 (the shares must be at least 25% paid-up, with any share premium fully paid-up and is registered as being a public company.
• A private company (LTD)- any other company

Question 12

What is a close company defined as?

Answer 12

One which is under the control of 5 or fewer persons (together with their associates) or is under the control of its directors.

Question 13

Who is responsible for determining general policy and issuing accounting standards. What are these accounting standards known as ?

Answer 13

FRC

Financial reporting standards

Question 14

Who is the International accounting standards body IASB

Answer 14

an independent, privately funded accounting standards setter.

Question 15

What does the IASB set?

Answer 15

Designated IFRS

Question 16

Does the IASB have authority?

Answer 16

No - has no authority to require compliance with its accounting standards.

However, under regulation of the European Parliament and Council, for each financial year, companies governed by EU law must prepare their statements in conformity with IFRS if, at their balance sheet date, their securities are admitted to trading on a regulated market of any member state.

Question 17

Which companies are required to use IFRS?

Answer 17

• Consolidated accounts of listed companies
• AIM companies

May use:

• Listed companies
• Other companies and limited liability companies