Published Financial Statements of Limited Companies Flashcards
What are the is the main role of the directors of a limited company?
Director of a limited company is appointed to ensure that the provisions of the companies acts which relate to the accounting records are followed.
What are the main provisions of the companies act which relate to the accounting records?
Accounting records must show and explain the company’s transactions and ensure that the company’s statements give a true and fair view of the company’s financial position.
A company’s accounting records must detail all of the assets and liabilities, details of inventories and day-to-day transactions.
Ensure the statements are prepared in accordance with the comapnies act.
What is the objective of IAS 1?
The objective of general pruose financial statements is to provide information about the financial position and cash flows of an entity that is useful to a wide range of users in making economic decisions.
What accounting concepts does IAS 1 require compliance with?
Going concern
Accruals concept
Materiality
Offsetting
Frequency of reporting
Compartive information
What items does IAS 1 require to be detailed on the face of the statement of profit or loss and other comprehensive income?
Revenue, finance costs, tax expense, other comprehensive income (revaulation of property)
How to calculate cosst of sales?
Opening inventories + Purchases - Purchases returns - Carriage inwards - Closing Inventories.
What are dividends, how many times a year are they paid?
Dividends are distributions to shareholders who own the company as a return on their investment.
Paid twice a year, interim dividend and final dividend.
However only the dividends paid in the actual financial year are included on the financial statements.
Name 2 fundamental qualitative characteristics?
Relevance and Faithful Representation
Name 4 enhancing qualitative characteristics?
Timliness
Comparability
Verifiability
Understandability
What is a bonus issue?
Extra issue of shares to exisiting shareholders at no cost. A bonus issue does not raise additional finance for the company, it simply is a means of reclassifying reserves as share capital.
Which account is used to make a bonus issue and why?
Share premium account as the reserve is non distributable.
What is the double entry to record a bonus issue?
Debit - Share premium
Credit - Share capital
As they are both liability accounts, credit is an increase and debit is a decrease
How to work out the new shares issued for a bonus issue which is 1 for 4 bonus issue?
Share capital / 4
What is a rights issue?
A rights issue is an issue of shares to existing shareholders at below market value.
Advantages of a rights issue?
Cheap and convienient way of raising capital and cuyrrent shareholders retain control as its easier to sell to these shareholders then find new ones.
Whats the double entry to record a rights issue?
Debit - Bank
Credit - Share capital
Credit - Share premium
What is the double entry to record an increase in value of a non current asset?
Debit - Non current assets
Credit - Revalutation reserve
Also the value is then added onto the statement of profit r loss and other comprehensive income.
If an asset is revalued by £2 million to £4.5 million, how will this be shown on the financial statements?
The PPE value will be increased by 2 million, however the accumulated depreciation will be the balance from the TB + the decpreciation charge of the new revalued amount only (4.5 million).
If depreciation is apportioned between cost of sales, distribution and admin expenses will this be a plus or a minus on the total of these expenses?
Plus
