Week 7 Flashcards
What are shares and what are the two types?
Shares = Units of ownership of a company
‘Par’/’Nominal = Face value of the shares
‘Issuing shares at premium’ = Issuing shares at a higher price than ‘par’
What is a ‘rights issue’ and how does it work?
It gives existing shareholders a chance to purchase new shares.
For example, if priced at ‘2 for 5’, then for every 5 shares an owner has they an purchase 2 more
How is a ‘2 for 5 rights issue’ recorded?
1st) Work out how many shares are being offered
(Total shares / 5) x 2
2nd) Work out ‘par’ value of new shares, add this to ordinary share capital
3rd) Work out the extra revenue generated, so the difference between par value of shares and what is actually charged, add this to share premium
4th) Add total amount of cash received to bank
What is a suspense account?
A temporary account that is used when accountant doesnt know the right account -> these can never appear in financial statements
What is a debenture?
Debt instrument used by firms to BORROW money
Where does interest received go on financial statements?
On PnL -> Underneath operating profit -> goes as ‘finance income’
What happens when an asset is fully depreciated?
Its NBV cannot go below 0
What are some examples of ethical dilemas facing accountants?
-Pressure to manipulate financial statements
-Conflicts of interest
-Aggressive tax strategies
-Greenwashing
-Confidentiality VS Transparency (Whistleblowing)
What law / official shit governs ethics in accounting?
The Companies Act (2006) -> Requires directors to ensure accounts are fair and true
‘IESBA - Code of Ethics
(International Ethics Standards Board for Accountants)’
What are the principals of the IEASBA Code of ethics?
-Integrity
-Objectivity
-Professional Competence and due care
-Confidentiality
-Professional Behaviour
