S1 - regulation and presentation Flashcards
what is the accounting equation
assets = liabilities + capital
what are the business structures
unincorporated = sole trader or partnership
Incorporated = private limited company or public limited company
what are limited companies
separate legal entity
Perpetual life
Limited liability
Tax paid on profits
Ltd shares can’t be bought by public, smaller businesses, a few shareholders, owner managed
Plc shares can be bought by public, larger organisations, owned by thousands of shareholders, board elected by shareholders
what is shareholder return
dividend + capital growth
executive v non executive directors
Employees v not
Salaries v independent
Day to day running v relatively small remuneration
Owner elected by owners v oversee the running of business on behalf of the shareholders
why do we regulate financial reporting
separation of managers and owners
Accounts publicly available
Relied upon by many different users
Comparability
Standards define contractual terms, reduce subjectivity and helps avoid accounting scandals
qualitative characteristics of financial information
fundamental - relevance, faithful representation
Enhancing - comparability, verifiability, timeliness, understandability
conceptual framework
Scope
Objective
Definitions and criteria
Accounting treatment
how to judge materiality
Identify
Assess
Organise
Review
what is SOFP
property, plant, equipment
Inventory
Trade and other payables
Trade and other receivables
Current and non current
SOFP disclosures
accounting policies
Greater detail of items
Information to assist prediction of future cash flows
Information for other stakeholders
what is statement of comprehensive income
replaces SOPL
‘Other comprehensive income’
Unrealised gains and losses
Extension to statement of income or separate statement
presentation of statements
costs analysed by function - sales, distribution, admin
Costs analysed by nature - raw, employee, operating, depreciation
what is cost of sales
opening inventory + purchases - closing inventory
Salaries of production staff
Substantial inventory loss
Charges related to production NCA - maintenance, depreciation, loss on disposal
what are distribution costs
salaries of marketing staff
Sales commission
Vehicle running costs
Depreciation of NCA used by distribution
Losses on disposal
Advertising and selling activities
what are admin expenses
salaries of admin staff
Depreciation of NCA used by non production operations
Amortisation of intangible assets
Cash discounts to customers
Irrecoverable debts
what is SOCIE
shows movement in each component of equity in the year
Effects of changes in accounting policies
Correction of errors recognised
Equity holders
Prior period adjustments
Share issues
Transfers from revaluation reserve
SOCIE disclosures
accounting policies
Details of certain items that have been charges in arriving at operating profit
Exceptional items
Makeup of individual liabilities and assets
Sensitive items such as auditors remuneration
Will vary between companies depending on requirements
why are there differences between identical transactions
how inventory is values
Choice of depreciation policy
Management attitudes
Capability of accounting system
