Chapter 13 & 14: Company Financial Statements & Taxation Flashcards
Company Financial Matters
Limited Companies (Ltds) Indicates That It’s Members Are?
Only Liable For Any Amounts Outstanding on The Shares They Hold.
Company Financial Matters
Public Limited Companies (PLCs) Are Companies That?
May Issue Shares to The General Public.
All Companies Listed on The Stock Exchange Are ‘plcs’.
Company Financial Matters
Under FRS 102, How is Profit Presented in The 1 Statement Approach?
- The Statement of Comprehensive Income
The Profit & Loss Account is Terminology Used Under The CA 2006.
Company Financial Matters
Under FRS 102, How is Profit Presented in The 2 Statement Approach?
- Income Statement
- Statement of Other Comprehensive Income
Company Financial Matters
Corporation Tax is Recorded in The Accounts as Follows:
- 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.
Company Financial Matters
What is an Interim Dividend?
An Amount Paid to Shareholders on Account of The Total Dividend Before The Year End.
Company Financial Matters
How is an Interim Dividend Recorded in the Accounts?
- Dr Profit & Loss Account Reserve (B/S)
- Cr Bank
Company Financial Matters
A Final Dividend is Accounted For in The Year it’s Paid, if It’s:
- Approved at a Board Meeting; and
- Declared After The Year End.
Company Financial Matters
Under FRS 102, What is The Balance Sheet Referred to as?
The Statement of Financial Position.
Company Financial Matters
What’s Different About The Presentation of Debtors & Creditors in a Company’s Balance Sheet?
Shown as 1 Figure.
* Breakdown as a Disclosure Note
Company Financial Matters
Some Disadvantages of Companies Include:
- Audit Fees (if Required)
- Financial Statements Must be Prepared in a Regulated Format
- Greater Administrative Burden
Company Financial Matters
What Are Ordinary Shares Also Called?
Equity Shares.
Company Financial Matters
What is The Difference Between Ordinary & Preference Shares?
- Ordinary Shares Are More Risky as Reward is Based on Company Performance
- Preference Shareholders Have Their Entitlement Fixed
Company Financial Matters
What Are The Benefits of Holding Preference Shares Over Ordinary Shares?
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.
Company Financial Matters
What Are Debentures?
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.
Company Financial Matters
Why is Purchasing Debentures More Beneficial Than Purchasing Shares?
Interest on Loans Paid in Priority to Dividends.
Company Financial Matters
How is Loan Finance Recorded in The Accounts?
- Dr Bank
- Cr Long-Term Creditor
Money Received by The Company.
- Dr Interest Paid
- Cr Bank
Annual Interest Paid to The Providers.
Company Financial Matters
Director’s Loan Accounts Are Common in:
Smaller Companies.
Shown in The Balance Sheet as Either a Debit or Credit.
Company Financial Matters
Cash Drawn Out (DLA) is Recorded as:
- Dr Directors’ Loan Account
- Cr Bank
Company Financial Matters
Directors Vote Themselves Salaries & Bonuses at The Year End (DLA), Recorded as:
- Dr Salaries
- Cr Directors’ Loan Account
Offset Against The Amount Withdrawn Rather Than Being Paid.
Taxation in Companies
What Must a VAT Registered Person do?
Charge VAT to Their Customers.
* Adds Onto Selling Price if Subject to VAT at The Standard or Reduced Rate
Taxation in Companies
What is VAT Charged on Sales Known as?
Output VAT.
The Trader is Merely Acting as a Collector of VAT on The Behalf of HMRC.
Taxation in Companies
How Often Must Net VAT be Calculated?
Every Quarter.
By Way of a VAT Return Submission.
Taxation in Companies
Where Amounts Are Given Inclusive of VAT, The VAT Element is Calculated as?
VAT Rate / (100 + VAT Rate)
Taxation in Companies
Sometimes VAT Cannot be Recovered, For Example:
- VAT on Business Entertaining
- Blocked VAT on Cars
Taxation in Companies
If VAT is Irrecoverable?
It is a Cost to The Business.
* Account For The Full Cost (VAT Inclusive) to The Cost/Expense Account
Taxation in Companies
The Flat Rate Scheme Was Introduced For?
Small Businesses From 25 April 2002.
* Less VAT Records
* Simpler Calculations
Taxation in Companies
Under The Flat Rate Scheme, VAT is Still Charged on?
Sales at The Appropriate Rate.
Taxation in Companies
Under The Flat Rate Scheme, VAT is Calculated as?
A Percentage of VAT Inclusive Sales.
The Percentage Depends on The Trade The Business is in.
Taxation in Companies
VAT Should Not be Claimed on Purchases Under The Flat Rate Scheme, Unless?
- Expeniture is > £2,000 on a Capital Asset; or
- Expenditure Relates to Pre-Registration Input VAT.
Taxation in Companies
If Actual Corporation Tax Payable is Higher Than The Estimate, There is?
An Under-Provision.
* Dr Corporation Tax Charge
* Cr Corporation Tax Creditor
Increases The Following Years Tax Charge.
Taxation in Companies
If Actual Corporation Tax Payable is Lower Than The Estimate, There is?
An Over-Provision.
* Dr Corporation Tax Creditor
* Cr Corporation Tax Charge
Decreases The Following Years Tax Charge
Taxation in Companies
Timing Differences Are Caused By?
The Disparity Between Depreciation & Capital Allowances.
Taxation in Companies
What is The Main Purpose of The Profit Reconciliation?
To Show Users Why the Tax Charge Differs from What Expected.
Split Between Permenant and Timing Differences.
