Company accounts Flashcards
What is the primary purpose of company accounts?
To present a true and fair view of the profits as prescribed by statute.
Company accounts must adhere to specific formats and provide key information to the readers.
What is the Accounting Reference Date?
The last day of the month in which the anniversary of its incorporation falls.
Companies have the option to change this date to one of their choosing.
How long do private companies have to file accounts at Companies House?
Within nine months of the end of the accounting period.
How long do public companies have to file accounts at Companies House?
Within six months of the end of the accounting period.
How is the bottom half of the balance sheet different in a company’s account c.f a partnership account?
The bottom half of the balance sheet consists of share capital, reserves, and retained earnings and follows a different format.
Do sole partners and partnerships pay tax?
No, they do not pay tax, but companies must include a statement of corporation tax.
What are dividends in the context of company accounts?
An appropriation of profits for shareholders, usually appearing in the Statement of Changes in Equity.
What must companies with subsidiaries publish?
Accounts for the group of companies as well as their own.
What does the Called Up Share Capital represent?
The aggregate amount that has been ‘called up’ on each class of issued shares - i.e the nominal value of its shares in issue
What is shown in the Share Premium Account?
The difference between the nominal value of shares and the amount shareholders actually paid for the shares.
This amount is non-distributable and reflects capital reserves.
What does the Revaluation Reserve track?
Notional profit when the value of non-current assets increases.
What type of profit does the Revaluation Reserve represent?
Unrealised profit until the asset is sold.
What does retained earnings represent?
Profits after tax earned by the company over its history that have not been distributed by way of dividend.
What is required for a company to make a distribution?
A company can make a distribution provided that it has ‘profits available for purpose’.
How are distributions recorded in accounting?
Distributions are recorded as a capital account as they are transactions between the business and its owners.
What are the two types of dividends for ordinary shares?
Final Dividend and Interim Dividend
What is a Final Dividend?
Typically passed at the AGM, declared in Director’s Report and approved by ordinary resolution of shareholders.
When does a proposed dividend become a debt enforceable by shareholders?
A proposed dividend does not constitute a debt enforceable by the relevant shareholders until it is approved.
How is a declared but unpaid dividend reflected in the financial statements?
If the declared dividend has not yet been paid to shareholders by the time the accounts for that year have been prepared, it will be:
- taken into account in the SOCIE
- and it will be recorded in the current liabilities in the BS
If it is only proposed and not approved, it will not appear in the accounts for that period.
What is an Interim Dividend?
These are dividends paid during and in respect of the current accounting period. They are declared by BR and do not require SH resolutions.
Can a board resolution to pay an interim dividend be rescinded?
Yes, any board resolution to pay an interim dividend may be rescinded before the interim dividend is paid.
Is an unpaid interim dividend a debt that shareholders can sue upon?
No, an unpaid interim dividend is not a debt that the shareholders are legally entitled to sue upon.
How is an interim dividend reflected in accounts?
Will only be reflected in accounts if they have been paid – taken into account in the SoCiE.
What are Preference Shares?
Will usually be paid a preference dividend twice a year and the amount will already be known.
