1. Interest income 2. Dividend income

Company Financial Statements Flashcards by Harry Lockyer

IAS 1 Company Statement Of Profit or Loss format

Revenue
Cost of Sales

GROSS PROFIT
Other operating income
Distribution costs
Admin expenses

OPERATING PROFIT
Finance cost
Investment income

PROFIT BEFORE TAX
Income tax

PROFIT FOR THE PERIOD

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Finance cost

Interest expense

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Investment income

Interest income
Dividend income

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Revenue

Income arising from ordinary activities of an entity

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IFRS 15 Revenue from Contracts with Customers 5 steps for recognition of revenue

Identify contract with customer
Identify separate performance obligations
Determine transaction price
Allocate transaction price the the performance of obligations
Recognise revenue when a performance obligation is satisfied

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Identify contract with customer

To understand what has been agreed

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Separate performance obligations

Supply of goods/services

Should be accounted for separately if it could be sold separately (single in performance obligation)

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Allocate transaction price to the performance obligations

Allocate in proportion to stand alone selling price of each performance obligation

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Performance obligation being satisfied

When customer obtains control of the promised goods/services

Any point of time or over time

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Cost of sales

Cost of goods/services sold

Production related

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Distribution costs

Selling or delivering

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Administrative expenses

All other expenses

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Purchases classification

COS

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Carriage inwards classification

COS

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Closing inventory classification

COS

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Substantial losses of inventory classification

COS

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Production staff wages classification

COS

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Maintenance expenses classification

COS

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Depreciation expenses of production and losses on disposal classification.

COS

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Wages of marketing and distribution staff classification

Distribution costs

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Sales commission classification

Distribution costs

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Vehicle running costs classification

Distribution costs

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Carriage outwards

Distribution costs

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Depreciation of motor vehicles used for distribution classification

Distribution costs

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Marketing costs (advertising, promotion)

Distribution costs

Amortisation classification

Admin expenses

Substantial loss of inventory expense classification

Admin expenses

Irrecoverable debts expense classification

Admin expenses

Company statement of financial position layout

Assets Non-current PPE Intangible Investments Current Inventories Trade and other receivables Prepayments Cash + equiv Total Assets Equity and Liabilities Equity Ordinary share capital Irredeemable preference share capital Share premium account Reserves Retained earnings Non-current liabilities Loan notes Current liabilities Trade and other payables Short term borrowings Tax payable Total equity and liabilities

Overdraft classification

Short term borrowings

Ordinary shareholders

Own the share capital and reserves of the company Have voting rights May receive dividend (always after preference shares)

Ordinary shares classification

Equity

Ordinary dividends expressed as

pence per share

Preference shareholders dividend calculated

% NV

Preference shareholders own only…

Share capital only. Not reserves

Types of preference share

1. Redeemable 2. Irredeemable

Redeemable preference shares classification

Debt (Not equity)

Redeemable preference share dividends classification

Finance costs

Irredeemable preference shares classification

Equity

Share capital values

Nominal/par value Issued at an issue price (at least NV)

Share market value

Calculated in reference to stick market if listed Not on financial statements

Share issue DE

Dr Cash - Issue price x no. shares Cr Share capital - NV x no. shares Cr Share premium - Excess over NV x no.

Share capital + premium classifications

Equity

Rights issue

Offer of new shares to existing shareholders in proportion to their existing shareholding at a stated price (usually below MV but has to be above NV)

Rights issue DE

Same as share issue

Bonus/capitalisation/scrip issue

Issue of new shares to existing shareholders in proportion to existing shareholding. No cash received. So funded from reserves. Any reserve can be used. Though non-distributable reserve used in preference to reserves which can be distributed. If share premium account insufficient then excess usually debited to retained earnings.

Bonus issue DE

Dr share premium (/other reserve) Cr share capital

Authorised share capital

NV of maximum no. shares a company can have in issue at once

Issued share capital

NV of shares actually issued

Called up share capital

NV of issues share capital requested from shareholders Shows on SFP

Paid up share capital

NV of called up share capital paid by shareholders

Differences between called up and paid up share capital classification

A receivable

Retained earnings definition

All the retained profits of the company up to the SFP date

Retained earnings calculation

RE b/f + Net Profit - Dividends

General reserve

Extension of retained earnings A c may choose to transfer some retained earnings into a general reserve

Statement of changes in equity movements

1. Profit 2. Dividends paid 3. Transfers between reserves 4. Share issues

Reserves

1. Share premium 2. Retained earnings 3. General reserve

Issue of a long term liability

Loan notes

Loan notes aka

Bonds Debentures

Loan notes process

Someone buys a loan note for a NV Effectively loaning that amount to C Repayable in certain no. years Holder receives annual fixed %

Loan note issue DE

Dr Cash Cr Non-current liabilities

Loan note interest rate aka

Coupon rate

Loan note interest classification

Finance cost (P&L)

Loan note interest payment DE

Dr Finance cost Cr Cash/Accrual

IAS 37 Provisions, Contingent liabilities and contingent assets: Provision definition

Liability to a 3P, where either the amount or timing of payment isn’t certain E.g. warranty claims, refunds for returned goods, litigation

Recognising a provision

Present obligation to incur the expenditure + Probable (<50%) that expenditure will occur

Are allowances provisions?

No, they are adjustments to value of asset, not liabilities.

Recording a provision DE

Dr Relevant expense account Cr Provision (SFP)

When expenditure for which provision created is incurred DE

Dr Provision Cr Cash at bank

Expenditure less than provision

Excess accounted as profit

Expenditure more than provision

Excess recoded as an expense

Accounting for company tax based on

Estimates initially (based on net profit) Because C’s tax bill is not finalised and paid until 9m after YE

Accounting for tax liability DE

Dr Tax expense (P&L) Cr Tax payable (SFP)

Paying actual tax bill DE

Dr Tax payable Cr Cash

Tax more than liability accrued DE

Dr Tax expense Cr Tax payable

Tax less than liability accrued DE

Dr Tax payable Cr Tax expense

What is the opening balance for working out tax payable?

Last years’ estimated tax liability

What is this years’ tax payable closing liability?

This year’s tax estimate for next year

Statement of profit or loss tax charge consists of

1. Tax liability for the year 2. Under/Over provision in prior year

A debit on the income tax payable account is an over or under provision from previous year?

Under provision

A credit on the income tax payable account is an over or under provision from previous yea

Over provision