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ACC CBE > Chapter 13 & 14: Company Financial Statements & Taxation > Flashcards

Chapter 13 & 14: Company Financial Statements & Taxation Flashcards

1
Q

Company Financial Matters

Limited Companies (Ltds) Indicates That It’s Members Are?

A

Only Liable For Any Amounts Outstanding on The Shares They Hold.

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2
Q

Company Financial Matters

Public Limited Companies (PLCs) Are Companies That?

A

May Issue Shares to The General Public.

All Companies Listed on The Stock Exchange Are ‘plcs’.

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3
Q

Company Financial Matters

Under FRS 102, How is Profit Presented in The 1 Statement Approach?

A
  • The Statement of Comprehensive Income

The Profit & Loss Account is Terminology Used Under The CA 2006.

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4
Q

Company Financial Matters

Under FRS 102, How is Profit Presented in The 2 Statement Approach?

A
  • Income Statement
  • Statement of Other Comprehensive Income
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5
Q

Company Financial Matters

Corporation Tax is Recorded in The Accounts as Follows:

A
  • Dr CT Charge (P&L)
  • Cr CT Creditor (B/S)

To Create The Charge.

  • Dr CT Creditor
  • Cr Bank

When The Tax is Paid The Following Year.

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6
Q

Company Financial Matters

What is an Interim Dividend?

A

An Amount Paid to Shareholders on Account of The Total Dividend Before The Year End.

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7
Q

Company Financial Matters

How is an Interim Dividend Recorded in the Accounts?

A
  • Dr Profit & Loss Account Reserve (B/S)
  • Cr Bank
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8
Q

Company Financial Matters

A Final Dividend is Accounted For in The Year it’s Paid, if It’s:

A
  • Approved at a Board Meeting; and
  • Declared After The Year End.
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9
Q

Company Financial Matters

Under FRS 102, What is The Balance Sheet Referred to as?

A

The Statement of Financial Position.

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10
Q

Company Financial Matters

What’s Different About The Presentation of Debtors & Creditors in a Company’s Balance Sheet?

A

Shown as 1 Figure.
* Breakdown as a Disclosure Note

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11
Q

Company Financial Matters

Some Disadvantages of Companies Include:

A
  • Audit Fees (if Required)
  • Financial Statements Must be Prepared in a Regulated Format
  • Greater Administrative Burden
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12
Q

Company Financial Matters

What Are Ordinary Shares Also Called?

A

Equity Shares.

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13
Q

Company Financial Matters

What is The Difference Between Ordinary & Preference Shares?

A
  • Ordinary Shares Are More Risky as Reward is Based on Company Performance
  • Preference Shareholders Have Their Entitlement Fixed
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14
Q

Company Financial Matters

What Are The Benefits of Holding Preference Shares Over Ordinary Shares?

A

Preference Shareholders Have Priority Over Ordinary Shareholders in:
* Payment of Dividends
* Repayment of Capital in a Wind up

Winding up Occurs When a Company Ceases to Exist as a Legal Entity.

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15
Q

Company Financial Matters

What Are Debentures?

A

Loans Repayable on a Fixed Future Date With a Fixed Amount of Interest.

(Usually Has a Term > 10 yrs)

Most Common Form of Loan Finance for Larger Companies.

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16
Q

Company Financial Matters

Why is Purchasing Debentures More Beneficial Than Purchasing Shares?

A

Interest on Loans Paid in Priority to Dividends.

17
Q

Company Financial Matters

How is Loan Finance Recorded in The Accounts?

A
  • Dr Bank
  • Cr Long-Term Creditor

Money Received by The Company.

  • Dr Interest Paid
  • Cr Bank

Annual Interest Paid to The Providers.

18
Q

Company Financial Matters

Director’s Loan Accounts Are Common in:

A

Smaller Companies.

Shown in The Balance Sheet as Either a Debit or Credit.

19
Q

Company Financial Matters

Cash Drawn Out (DLA) is Recorded as:

A
  • Dr Directors’ Loan Account
  • Cr Bank
20
Q

Company Financial Matters

Directors Vote Themselves Salaries & Bonuses at The Year End (DLA), Recorded as:

A
  • Dr Salaries
  • Cr Directors’ Loan Account

Offset Against The Amount Withdrawn Rather Than Being Paid.

21
Q

Taxation in Companies

What Must a VAT Registered Person do?

A

Charge VAT to Their Customers.
* Adds Onto Selling Price if Subject to VAT at The Standard or Reduced Rate

22
Q

Taxation in Companies

What is VAT Charged on Sales Known as?

A

Output VAT.

The Trader is Merely Acting as a Collector of VAT on The Behalf of HMRC.

23
Q

Taxation in Companies

How Often Must Net VAT be Calculated?

A

Every Quarter.

By Way of a VAT Return Submission.

24
Q

Taxation in Companies

Where Amounts Are Given Inclusive of VAT, The VAT Element is Calculated as?

A

VAT Rate / (100 + VAT Rate)

25
Q

Taxation in Companies

Sometimes VAT Cannot be Recovered, For Example:

A
  • VAT on Business Entertaining
  • Blocked VAT on Cars
26
Q

Taxation in Companies

If VAT is Irrecoverable?

A

It is a Cost to The Business.
* Account For The Full Cost (VAT Inclusive) to The Cost/Expense Account

27
Q

Taxation in Companies

The Flat Rate Scheme Was Introduced For?

A

Small Businesses From 25 April 2002.
* Less VAT Records
* Simpler Calculations

28
Q

Taxation in Companies

Under The Flat Rate Scheme, VAT is Still Charged on?

A

Sales at The Appropriate Rate.

29
Q

Taxation in Companies

Under The Flat Rate Scheme, VAT is Calculated as?

A

A Percentage of VAT Inclusive Sales.

The Percentage Depends on The Trade The Business is in.

30
Q

Taxation in Companies

VAT Should Not be Claimed on Purchases Under The Flat Rate Scheme, Unless?

A
  • Expeniture is > £2,000 on a Capital Asset; or
  • Expenditure Relates to Pre-Registration Input VAT.
31
Q

Taxation in Companies

If Actual Corporation Tax Payable is Higher Than The Estimate, There is?

A

An Under-Provision.
* Dr Corporation Tax Charge
* Cr Corporation Tax Creditor

Increases The Following Years Tax Charge.

32
Q

Taxation in Companies

If Actual Corporation Tax Payable is Lower Than The Estimate, There is?

A

An Over-Provision.
* Dr Corporation Tax Creditor
* Cr Corporation Tax Charge

Decreases The Following Years Tax Charge

33
Q

Taxation in Companies

Timing Differences Are Caused By?

A

The Disparity Between Depreciation & Capital Allowances.

34
Q

Taxation in Companies

What is The Main Purpose of The Profit Reconciliation?

A

To Show Users Why the Tax Charge Differs from What Expected.

Split Between Permenant and Timing Differences.

ACC CBE (7 decks)

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