CHAPTER 13 - NON-STAT ACCOUNTS FOR LTD COS Flashcards
What are the 4 sources of capital for a limited company and where are these shown on the Balance Sheet?
Share capital from shareholders
Retained profits
Loan capital from third parties
Other capital income (shares sold above face value)
Shown under ‘Financed By’ section
Name the 2 types of share capital
Authorised - the maximum amount allowed in the memorandum of assosiation
Issued - the amount actually issued to shareholders (which is recorded in the Balance sheet)
What’s the difference between the Nominal Value of a share and the Share Premium value?
Nominal Value = face value as agreed in MOA
Share Premium = the difference if sold for more than face value (shown separately in the accounts)
Name the 2 main types of shares
Ordinary - voting rights but last to receive dividend (so may not get one)
Preference - no voting rights but get a fixed dividend
Name the 2 types of Reserves
Revenue Reserves
- retained profits not distributed to shareholders
- on Balance Sheet as revenue reserves in the Financed By section
Capital Reserves
- resulting from a capital transaction (revaluing land)
- shown before revenue reserves on the Balance Sheet
What are Debentures?
Long term loans secured against company assets
Debenture holders are creditors
Interest paid and recorded as expense on P&L
Name the 5 differences on the Trading and P&L account between Sole Traders and Limited Companies
In the Ltd Company version….
- Sales ae called Turnover
- Expenses categorised as
- Distribution Costs
- Administration Costs
- Finance Costs
- Directors’ Renumeration charged to P&L
- Interest (bank loans, debentures) shown after operating profit
- The Appropriation Account shows how profit will be distributed
What does the Appropriation account show and where is it kept?
A section on the P&L showing:
- Corporation Tax - tax paid on profits
- Dividend to Preference Shareholders
- Dividend to Ordinary Shareholders
- Retained Profits - the balance
What is the order of the Trading and P&L account for Ltd COs?
Trading (as for Sole Trader)
- Turnover
- Less COS
- GP
P&L
- Distribution Costs
- Administration Costs (inc Directors renum)
- Operating Profit (GP minus above costs)
- Less Debenture interest
- = Profit before taxation
Appropriation
- Provision for Corporation Tax
- Profit after tax
- Preference Share dividend
- Ordinary Share dividend
- Preference Share dividend
- Retained profit for year
How do we calculate Corporation Tax?
20% of operating profit before tax
Included as a provision on the P&L and deducted (credited) from operating profit before tax
How do we calculate an ordinary share dividend?
its the proposed dividend percentage for that year of the face value of issued shares
So if a 20% dividend is being paid this year and you have issued £70,000 of shares the dividend value would be
70,000 x 20% = 14,000
Deducted (credited) from profit after tax on P&L
What might be missing if the balance sheet doesn’t balance?
Corporation Tax and Proposed Dividend (both should be listed under current liabilities
Explain the headings on a Ltd Co balance sheet
Fixed Assets - order of permance showing, original cost, accumulated appeciation and NBV
Current Assets - order of liquidity, Closing Stock, Debtors, Bank
Current Liabilities - trade creditors, corporation tax, proposed share dividends, VAT payable, overdrafts, debenture interest, accruals
Net Current Assets - (CA - CL)
Total Assets less current liabilities - (sum of above)
Less Long Term Liabilities - debentures, loans
Net Assets
Financed By - issued share capital, share premium, specific reserves, retained profit (from P&L)
What 2 lines are added to the P&L account in the 2nd and subsequent years?
Retained Profit Brought Forward - from previous year
Retained Profit Carried Forward - the overall balance
What 4 items are cumulative totals on the balance sheet in 2nd and subsequent years?
Depreciation (with fixed asset)
Retained Profits (financed by)
Issued share capital (financed by)
Share premium (financed by)
