Topic 5 Published Accounts of Limited Companies

Question 1

Stewardship

Answer 1

The accounts show the providers of finance how the funds that they have provided are being used. They seek to give reassurance that funds are being used wisely and for the purpose for which they were intended

Question 2

What is the stewardship function of accounting for limited companies affected by?

Answer 2

Companies Act 2010
Stock exchange Regulations
IAS
Tax Regulations

Question 3

Users of limited accounts

Answer 3

Shareholders
H&m Revenue & Customs
Trade payables
Employees
Potential investors

Question 4

What are the 3 reports that published accounts must contain

Answer 4

Chairman’s Report
Directors’ Report
Auditors’ Report

Question 5

What does a qualified audit report indicate?

Answer 5

The auditors are not satisfied in some way that the financial statements present a true and fair view

Question 6

Limitations of Published Accounts

Answer 6

Already out of date when released
Accounts provide historic data
The accounts are not very detailed
Only report purely financial information

Question 7

What are the financial ratios

Answer 7

Profitability: Gross Profit Margin, Groos Profit Mark-up, Profit to Revenue, Overheads to Revenue, Return on Capital Employed

Liquidity: Current Asset Ratio, Acid Ratio, Inventory turnover, Payables days, Receivables days

Gearing

Question 8

What are the accounting concepts that Financial Statements should comply with?

Answer 8

Accruals
Going Concern
Consistency
Materiality

Question 9

When can changes to accounting policies occur?

Answer 9

When there was a change in accounting standards

If the result will be that financial statements provide more relevant and reliable information to users