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Accounting > Published Accounts > Flashcards

Published Accounts Flashcards

1
Q

2 reasons accounts are produced

A

Stewardship purposes - to show the shareholders how their money is being used. This is evident at the Annual General Meeting when the directors present the financial statements to the shareholders.
Management purposes - managers use the accounts to make decisions such as what products to stop selling and what branches to close.

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2
Q

Main elements of published reports

A

Income statement
Statement of financial position
Statement of changes in equity
Statement of cash flow
Notes
Directors report
Auditors report

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3
Q

Why do companies publish accounts?

A

Legal requirement
Publicity
Potential investors
Shareholders

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4
Q

Internal users of accounts

A

Management
Employees
Owners/shareholders

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5
Q

External users of accounts

A

Trade payables
Investors
Customers
Debenture holders

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6
Q

Limitations of published accounts

A

Window dressing
Historic accounts
Quantitive
Not fully detailed

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7
Q

Role of directors

A

Elected by shareholders
Senior managers of the business
Prepare financial statements within a certain framework to show a true and fair view of the business

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8
Q

Role of auditors

A

Independent accountants
Check the financial statements
Report to shareholders to assure them the accounts and true and fair

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9
Q

What’s a schedule of non current assets?

A

A table that sets out how the value of the asset changes from the start to the end of the year

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10
Q

What changes affect cost?

A

Additions
Disposals
Revaluation
Impairment

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11
Q

What is impairment?

A

When the value of an asset is less than its Net book value (the opposite of revaluation)

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12
Q

What changes affect depreciation?

A

Charge for the year
Eliminated on disposal
Eliminated on revaluation
Eliminated on impairment

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13
Q

After a revaluation what way may the depreciation now be calculated?

A

The depreciation may be split equally over the remaining useful life of the asset

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14
Q

Why do limited companies publish accounts?

A

Law
Publicity
Investors (potential and existing)

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15
Q

What is meant by the stewardship function?

A

Board of directors show shareholders how investment is being used

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16
Q

What items are required in published accounts?

A

Income statement
Statement of financial position
Cash flow statement
Statement of changes in equity
Notes
Directors report
Auditors report

17
Q

How do (I) managers (II) employees (III) owners use the accounts?

A

(I) analyse performance and position
(II) assess performance and position in relation to job security
(III) analyse viability and profitability of investment

18
Q

How do (I) trade payables (II) investors (III) customers (IV) lenders use the accounts?

A

(I) to check credit worthiness of business to ensure they’ll be repaid
(II) to try determine the return they will earn on their investment
(III) to ensure there will continue to be a stable supply of goods
(IV) to ensure sufficient liquidity so that they will be repaid

19
Q

What are limitations of published accounts?

A

Window dressing
Historic data
Quantitative data
Lack of detail

20
Q

What is an auditor?

A

Independent accountant appointed by shareholders to check accounts present true and fair view

21
Q

Who are directors?

A

Senior managers appointed by shareholders to run the business of their behalf

22
Q

What are the duties of directors?

A

Prepare financial statements
Promote success of the company
Avoid conflicts
Don’t accept benefits

23
Q

What is the purpose of a Schedule of NCA?

A

Shows how values have changed over the year
Helps with drawing up statement of financial position

24
Q

What goes into the cost section of a schedule of NCA?

A

Additions
Disposals
Revaluation
Impairment

25
Q

Asset cost £35,000 with a NBV of £10,000 was sold for £12,000. What values go into the SoNCA?

A

Cost section £35,000 Depreciation section £25,000

26
Q

What goes into the depreciation section of a schedule of NCA?

A

Charge for the year
Eliminated on disposal
Eliminated on revaluation
Eliminated on impairment

27
Q

How is revaluation different in the SoNCA and the SoFP?

A

In the SoNCA it’s the difference between cost and new value but in the SoFP it’s the difference between NBV and new value

28
Q

What are the 3 elements when calculating the depreciation charge for the year?

A

Assets held for full year
Additions
Disposals

29
Q

How much depreciation is eliminated on disposal?

A

All deprecation to date

30
Q

How do we deal with depreciation in a revaluation/impairment?

A

Remove existing depreciation
Depreciate from the new amount

Accounting (19 decks)

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