Published Accounts of Limited Companies

Published Accounts
1. Every limited Company whether public or private, is required by law to produce financial statements each year, which are also available for anyone to inspect if they so wish.
2. Statutory Accounts
  1. Those which are required to be produced under company law, and a copy of these is filed with the Register of Companies (Public companies are required to file their accounts within 6 Months of the end of their financial year)
3. Annual Report and accounts
  1. Available to every shareholder and contains the main elements of published accounts: • Income statement • Balance sheet • Cash flow statement • Statement of changes in equity • Notes to the financial statements, including a statement of the company’s accounting policies • Directors’ report • Auditors’ report
Responsibilities of Directors
1. Directors general duty under the Companies Act 2006: • Act within their powers (normally derived from the company’s constitution, E.g. the Articles of Association) • Promote the success of the company • Exercise independent judgement • Exercise reasonable care, skill and diligence • Avoid conflicts of interest • Not accept benefits from third parties • Disclose an interest in any proposed transactions involving the company
2. Main Provisions of the Acts are that:
  1. A company’s accounting records must: • Show and explain the companies transactions • Disclose with reasonable accuracy at the time the financial position of the company • Enable the directors to ensure that the company’s income statement and balance sheet give a true and fair view of the company’s financial position
    1. True – means if any of the financial statements state that a transaction has taken place then, in reality, it has taken place; likewise, if an asset is shown on the balance sheet, then the asset actually exists
    2. Fair – implies that transactions and assets are shown using generally accepted accounting rules and principles
  2. A company’s accounting records must contain: • Day-to-day entries of money received and paid, together with details of the transactions • A record of the company’s assets and liabilities • Details of inventories held at the end of the year
  3. A company’s financial statements must be prepare according with the Companies Acts and with either UK accounting standards or International Accounting standards; additionally, the companies listed on the stock exchange must comply with regulations of the stock exchange
  4. The director must report annually to the shareholders on the way that they have run the company on behalf of the shareholders
3. Preparing the financial statements, which are then audited by external auditors, appointed by the shareholders of the company
4. Ensure statutory accounts are produced and filed with the Registrar of Companies, for public inspection. Annual accounts must be approved by the company's board of Directors and a copy of the Balance sheet filed with the Registrar of Companies must be sign by one of the directors on behalf of the board. Directors much prepare a Directors' Report, this must be approved by the board and the copy to be filed with the Registrar of Companies must be signed on behalf of the board by a director (or the company secretary)
Income Statements
1. Certain items such as Revenue, Financial Costs and Tax Expense must be detailed on the face of the income statement
2. Expenses must be analysed either by nature (raw materials, employee costs, Depreciation, etc) or by function (cost of sales, distribution expenses, sales and marketing expenses, administrative expenses, etc) - depending on which provided the more reliable and relevant information. The analysis by nature is often appropriate for manufacturing companies, while the analysis by function is commonly used by trading companies.
3. Distribution expenses:
  1. • Warehouse costs • Post and packaging • Delivery drivers’ wages • Running costs of delivery vehicles • Depreciation of delivery vehicles • Etc.
4. Sales and marketing expenses
  1. • Advertising costs • The salaries of sales people • The running costs of sales people’s cars • The cost of sales promotions • Etc.
5. Administrative Expenses
  1. • Office costs • Rent and rates • Heating and lighting • Depreciation of office equipment • Etc.
Statement of Changes in Equity
1. One of the financial statements
2. Shows the changes that have taken place to the shareholders' stake in the company - not only the realised profit or loss from the income statement, but also unrealised profits (such as the gain on the upwards revaluation of property) which are taken directly to reserves
Balance Sheet
1. These have to be shown in the Balance Sheet:
  1. • Property, Plant and Equipment • Investment Property • Intangible Assets • Inventories • Trade and other Receivables • Cash & Cash Equivalents • Trade and other Payables • Tax Liabilities • Issued Capital and Reserves
    1. Further details can be on the face of the balance sheet or in notes
2. Current Assets include:
  1. • Cash or Cash Equivalent • Those to be realised, sold or used within the normal operating cycle • Assets held for trading and expected to be realised within 12 months (The only current assets are, trade receivables, inventories and cash and Cash Equivalents)
3. Current Liabilities
  1. • Those expected to be settled within the normal operating cycle • Liabilities held for trading and expected to be settled within 12 months • Where the company does not have the right to defer payment beyond 12 months (The only current liabilities are, trade payables, tax liabilities and bank overdraft)
4. Share Capital
  1. The following are required to be disclosed on face of Balance Sheet or in Notes
    1. • Number of shares authorised • Number of shares issued and fully paid, and issued but not fully paid • Par (or nominal) value
Dealing with Dividends in the Financial Statements
1. Dividends is a payment to the shareholders of the company as a return on their investment
2. Paid twice a year, Interim dividend, which is paid just over half way through the financial year, and final dividend, which is paid early in the next financial year
  1. Interim dividend is based on the profits reported by the company during the first half of the year, while the final dividends is based on the profits reported for the full year
  2. Final dividends is proposed by the Directors but it then has to be approved by shareholders at the annual General Meeting (AGM) of the company.
    1. This process is finalised during the next financial year thus it is recorded not in the previous year but recorded in this year's financial statement
Directors' Report
1. Includes: • The principle activities of the company • A review of the activities of the company over the past year • Likely developments that will affect the company in the future, including research and development activity • Directors’ names and their shareholdings in the company • Proposed dividends • Any significant differences between the book value and market value of land and buildings • Political and charitable contributions • Actions taken on employee involvement and consultation • The companies policies on: 1) Employment of disabled people 2) Health and Safety at the work of employees 3) Payment of suppliers
Cash Flow Statements
1. Required to be included as part of the financial statements
  1. Shows an overall view of money flowing in and out during the accounting period
Auditors' Report
1. After the Directors have prepared the published accounts, the accounts must then be audited by external auditors appointed by the shareholders to check the accounts.
2. Printed in the published accounts
3. 3 main sections of the Auditors' report
  1. Respective Responsibilities of Directors and Auditors - The report states that directors are responsible for preparing the accounts, while the auditors are responsible for forming an opinion on the accounts
  2. Basic of Audit Options - the way in which the audit was conducted, other assessments, and the way in which the audit was planned and performed
  3. Opinion - the auditors' view of the company's accounts
    1. The Opinion is ‘unqualified’ if the auditors are of the opinion that: • The financial statements have been prepared properly, and • They give a true and fair view of the company’s affairs in accordance with the company law and international financial reporting standards (IFRS), as adopted by the European Union, and • The information given in the directors’ report is consistent with the financial statements
Accounting Policies
1. Specific accounting methods selected by the directors and followed by the company. E.g. Method of Depreciation
2. If there's a IAS and IFRS then that policy must be applied, but if there is not then the managers of the company must use their judgement to provide information that is relevant and reliable
3. Once adopted by a company, accounting policies are to be applied consistently for similar transactions - unless an accounting standard allows differing policies to be applied to categories of items
  1. Changes of accounting policies can only occur if the change is required by an accounting standard or if the change in results in the financial statements providing reliable and more relevant information
4. When there are changes in accounting policies, they are to be applied retrospectively. Any changes require the figure for equity and other figures from the income statement and balance sheet to be altered for previous financial statements
5. Important to the user of published accounts as they enable the user to: • Understand the accounts • Rely on the accounts as being free from bias • Make comparisons with different companies • Make reliable decisions based on the information given
Notes to the Financial Statements
1. IAS 1 requires notes to the financial statements. They provide detailed information regarding: • The basis of preparation used in the financial statements and the specific accounting policies used • Information required by international accounting standards that is not already included in the financial statements • Any additional information that is relevant to the understanding of the financial statements
Published Accounts and Internal Use Accounts
1. Regulatory framework of accounting - containing the Company Acts and IAS's - that sets out the requirements for published accounts. The regulatory framework details the financial statements that are to be produced - E.g. Income Statements are in the same format, Balance Sheet use the same headings, notes to the accounts give the same level of information.
  1. This allowing comparison between 2 or more companies, even if they are from different sorts of business, to be compared
2. Internal use company accounts are not subject to regulation and do not need to be audited. They are only for internal use of the company's directors and managers. This means it can be presented in a form that suits the users - both in the format of the financial statements and also the level of detail provided
3. Limitations of Published Accounts
  1. Published accounts are produced annually - the fortunes of the company could change quite considerably within such a time period
  2. Public companies must file their statutory accounts with the Registrar of Companies within 6 moniths of the financial year end - this means that, by the time the information is available to users of the accounts, the accounts are out-of-date
  3. The regulatory framework for accounting details the requirements for published accounts - invariably companies will not disclose additional information
  4. Published accounts report on what has gone on in the past and give little indication of what will happen in the future - E.g. changing markets of the state of the economy which could impact on the performance of the business in the future
  5. Published accounts cannot record aspects of the company which affect future performance - E.g. Quality of management, motivation of the workforce, product life cycles, enviromental input, ethical considerations
The Corporate Report: User Groups
1. People interested in the Corporate Reports: • Shareholders • Loan stock holders/debenture holders • Creditors (Trade Payables) • Managers and employees
  1. More Info on this in text book PAGE 130
2. Other users groups interested in the reports and accounts of companies: • The government and Government Agencies – Interested in the TAX and VAT due • The Public – Interested in the contribution of the company to the economy • Stock Market Analysts – Interested in the investment potential within the company, and whether the company’s share can be recommended to their investor clients • Pressure Groups, such as environmentalists – Interested in the company’s stance on social and environmental issues

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	Criado por Harshad Karia aproximadamente 11 anos atrás