Accounting for limited companies (A Level) flashcards

Topic 16: Accounting for limited companies

Tax payable $8,400 at the start and $9,900 at the end; tax charge $11,250. Tax paid?

8,400 + 11,250 − 9,900 = $9,750.

Equipment cost $22,000, accumulated depreciation $15,400, sold at a loss of $1,300. Proceeds?

Carrying amount $6,600. Proceeds 6,600 − 1,300 = $5,300.

960,000 ordinary shares of $0.50. A 1 for 8 rights issue at $1.20, all taken up. Cash, share capital, share premium?

120,000 new shares. Cash $144,000; share capital $60,000; share premium $84,000.

A company with 500,000 shares of $1.00 makes a 3 for 10 bonus issue. New shares and cash?

150,000 new shares; no cash. $150,000 of reserves become share capital; total equity is unchanged.

A building cost $230,000 with accumulated depreciation $35,000 and is revalued to $280,000. Journal?

Dr Building $50,000; Dr Accumulated depreciation $35,000; Cr Revaluation reserve $85,000. Shown in the statement of changes in equity, not the income statement.

Vehicles at cost $84,000 at the start and $97,000 at the end; a vehicle costing $19,000 was sold. Purchases?

97,000 − 84,000 + 19,000 = $32,000.

5% debentures of $160,000 all year; interest owing $2,000 at the start and $4,000 at the end. Finance cost and interest paid?

Finance cost $8,000. Paid 2,000 + 8,000 − 4,000 = $6,000.

Profit before tax $54,000; finance costs $3,500; depreciation $12,600; inventory up $5,100; receivables down $2,200; payables up $1,700

54,000 + 3,500 + 12,600 − 5,100 + 2,200 + 1,700 = $68,900 cash generated from operations.

Published accounts: what IAS1 requires vs what the Companies Acts require

IAS1: statements of financial position, profit or loss, changes in equity and cash flows; notes with accounting policies; prior-year figures. Companies Acts: directors' report; strategic report (not small companies); auditor's report (unless exempt).

How is a revalued asset depreciated afterwards?

The valuation is depreciated over the remaining useful life.

Rights issue vs bonus issue: effect on cash and total equity

Rights issue: cash comes in, so total equity rises. Bonus issue: no cash, reserves become share capital, total equity unchanged.

Reasons for publishing company accounts

Stewardship (directors report to owners who do not run the company); limited liability means lenders and suppliers need information; the law requires it.