Limited company accounts (AS Level) flashcards

Topic 7: Limited company accounts

The three internal company statements and the three profit lines

Income statement, statement of changes in equity, statement of financial position (not for publication). Profit lines: profit from operations; profit for the year before tax; profit for the year after tax.

10,000 ordinary shares of $0.40 nominal are issued at $1.15. Entries?

Dr Bank $11,500; Cr Share capital $4,000; Cr Share premium $7,500. Capital and premium together equal the cash received.

Gross profit $140,000; expenses $88,500; finance costs $5,250; tax $9,700. The three profit figures?

Profit from operations $51,500. Before tax $46,250. After tax $36,550.

$45,000 of 6% debentures; $1,350 interest paid during the year. Finance cost and liability?

Charge 6% × 45,000 = $2,700; owing $1,350 under current liabilities.

Retained earnings $16,000 at the start; loss for the year $21,500; dividends paid $2,000. Closing?

16,000 − 21,500 − 2,000 = ($7,500), a negative balance that reduces total equity.

A $50,000 loan is repaid in five equal annual instalments, the first due nine months after the year end. SOFP?

Current liabilities $10,000; non-current liabilities $40,000.

Share premium rose by $54,000 from an issue at a premium of $0.45 per share; nominal value $0.20. Shares, share capital, issue price?

54,000 ÷ 0.45 = 120,000 shares; share capital up $24,000; issue price $0.65.

Directors' fees vs dividends

Directors' fees or salaries are an expense of the company, even if the directors own shares. Dividends are the return on owning shares, shown in the statement of changes in equity.

What does 9615 exclude from the AS limited company topic?

Preference shares and general reserves are not examined. Rights issues, bonus issues and revaluation are International A-level only (3.2.6).