OxfordAQA A-Level Accounting: Limited company accounts (9615) – Revision Notes

Use these notes for fast recall of section 3.1.7, Limited company accounts, in the OxfordAQA International AS and A-level Accounting (9615) specification, Version 1.2, for International AS exams May/June 2025 onwards and International A-level exams May/June 2026 onwards. This section counts as International AS material, examined (per the specification) in Paper 2: Financial & Management Accounting. For full explanations and a complete trial-balance example, read the study guide.

When you are ready to apply these notes, use the practice questions. The adjustments you will need (accruals, prepayments, depreciation, doubtful debts) are revised in the sole trader revision notes, and shares and debentures as sources of finance are covered in the organisation types revision notes. The course hub is /boards/oxfordaqa/a-level/accounting/, the checklist is /checklists/oxfordaqa/a-level/accounting/, and the free diagnostics will flag weak spots. Every number here is invented; read amounts as dollars.

What the specification requires

• Draw up a limited liability company’s internal statements – income statement, statement of changes in equity, statement of financial position – which are not for publication.
• Three profit lines must be visible in the income statement: profit from operations, then profit for the year before tax, then profit for the year after tax.
• Possible rows in the statement of changes in equity: opening balances; profit (or loss) for the year; share issues, premium issues included; dividends paid; closing balances.
• The statement of financial position uses five sub-headings: current assets, non-current assets, equity, non-current liabilities, current liabilities.
• Not examined: preference shares and general reserves. Not examined at AS: rights issues, bonus issues, revaluation of non-current assets (these are in 3.2.6, International A-level only).

Key terms

Term	Meaning
Nominal value	The face value of one share, fixed when the share is created
Ordinary share capital	Shares issued x nominal value
Share premium	Amount received above nominal value on an issue; part of equity
Retained earnings	Accumulated profits after tax kept in the business, less dividends paid
Dividends paid	Profit distributed to shareholders; shown in the statement of changes in equity only
Finance costs	Interest on loans and debentures for the year
Taxation	The company’s tax on its profit for the year
Debentures	Long-term loans to the company carrying a fixed rate of interest

The figures that link the statements

From	Figure	To
Income statement	Profit for the year after tax	Retained earnings column of the statement of changes in equity
Statement of changes in equity	Closing balance of each component	Equity section of the statement of financial position
Year-end adjustments	Interest owing, tax owing, expenses owing	Current liabilities
Year-end adjustments	Prepayments, income due	Current assets (other receivables)

Method in steps: trial balance to three statements

1. Read every note first and mark each with two places it will go (one in the income statement or statement of changes in equity, one in the statement of financial position).
2. Work out cost of sales: opening inventory + purchases - closing inventory.
3. Adjust each expense for amounts owing or prepaid; calculate depreciation and any change in the provision for doubtful debts.
4. Calculate finance costs for the full year (rate x loan or debenture balance), not just the amount paid.
5. Build the income statement down through the three profit lines, deducting taxation last.
6. Find opening equity. If shares were issued during the year and the trial balance already includes them, subtract the issue from share capital and share premium.
7. Build the statement of changes in equity: opening balances, share issue, profit after tax, dividends paid, closing balances.
8. Build the statement of financial position with the five sub-headings, splitting any loan instalment due within 12 months into current liabilities.
9. Check it balances. Total assets = equity + non-current liabilities + current liabilities.

Reminder: one share issue, three numbers

A company issues 10,000 ordinary shares of 0.40 nominal value at 1.15 each.

Bank            10,000 x 1.15 = 11,500   (Dr)
Share capital   10,000 x 0.40 =  4,000   (Cr)
Share premium   10,000 x 0.75 =  7,500   (Cr)

Premium per share = issue price - nominal value. Share capital and share premium together always equal the cash received.

Which sub-heading?

Item at the year end	Sub-heading
Land, buildings, vehicles, equipment (carrying amount)	Non-current assets
Inventory, trade receivables less provision, prepayments, cash	Current assets
Ordinary share capital, share premium, retained earnings	Equity
Debentures or loans due more than 12 months ahead	Non-current liabilities
Trade payables, accrued expenses and interest, taxation owing, overdraft	Current liabilities

Must-know distinctions

• Dividends or drawings? Drawings reduce a sole trader’s capital; dividends reduce a company’s retained earnings. Neither is an expense.
• Directors vs owners. Directors’ fees or salaries are an expense of the company, even if the directors also own shares. Dividends are the return on owning shares.
• Operating profit and pre-tax profit. Finance costs explain the difference.
• Pre-tax and after-tax profit. Taxation explains the difference, and retained earnings receive only the after-tax figure.
• Capital and premium. Share capital is recorded at nominal value; any excess received is premium.
• Current vs non-current liabilities. Due within 12 months of the year end = current. A loan repaid in instalments may need splitting between the two.
• Internal vs published accounts. 3.1.7 is internal statements only. Published accounts and stakeholders’ use of them are 3.2.6, International A-level only.

Quick self-test

1. A company issues 25,000 ordinary shares of 2.00 nominal value at 3.10 each. Calculate the share capital, share premium and cash received.
2. Gross profit is 140,000, expenses are 88,500, finance costs are 5,250 and taxation is 9,700. Calculate the three profit figures.
3. A company has 45,000 of 6% debentures. Interest paid during the year was 1,350. State the finance cost charged and the amount shown as a liability.
4. Retained earnings were 27,300 at the start of the year. Profit after tax was 19,850 and dividends paid were 8,400. Calculate closing retained earnings.
5. Retained earnings were 16,000 at the start of the year. The company made a loss of 21,500 and still paid dividends of 2,000. Calculate closing retained earnings.
6. In which statement do dividends paid appear?
7. Under which sub-heading does taxation owing at the year end appear?
8. The share premium account rose by 54,000 after an issue at a premium of 0.45 per share. The nominal value is 0.20. Calculate the number of shares issued, the increase in share capital and the issue price.
9. A 50,000 loan is repaid in five equal annual instalments, the first due nine months after the year end. Show how it appears in the statement of financial position.
10. Which two equity items does 3.1.7 exclude from examination entirely?

Answers

1. Share capital 25,000 x 2.00 = 50,000; share premium 25,000 x 1.10 = 27,500; cash 77,500.
2. Profit from operations 140,000 - 88,500 = 51,500; before tax 51,500 - 5,250 = 46,250; after tax 46,250 - 9,700 = 36,550.
3. Charge 6% x 45,000 = 2,700; owing 2,700 - 1,350 = 1,350 under current liabilities (other payables).
4. 27,300 + 19,850 - 8,400 = 38,750.
5. 16,000 - 21,500 - 2,000 = (7,500), a negative balance that reduces total equity.
6. The statement of changes in equity (never the income statement).
7. Current liabilities.
8. 54,000 / 0.45 = 120,000 shares; share capital up 120,000 x 0.20 = 24,000; issue price 0.20 + 0.45 = 0.65.
9. Current liabilities 10,000; non-current liabilities 40,000.
10. Preference shares and general reserves.

Where marks are usually lost

• Putting dividends paid in the income statement as if they were an expense.
• Charging only the interest paid instead of the full year’s finance cost.
• Recording an issue at the full issue price in share capital, leaving share premium unchanged.
• Adding profit before tax to retained earnings instead of profit after tax.
• Leaving taxation owing out of current liabilities.
• Taking opening share capital straight from a trial balance that already includes the year’s issue.
• Showing a loan due in several years under current liabilities, or a next-year instalment under non-current liabilities.
• Showing only one profit line when the question asks for an income statement of a limited company.
• Leaving out the five sub-headings, or putting an item under the wrong one.

Official syllabus

OxfordAQA International AS and A-level Accounting (9615) specification, Version 1.2, for International AS exams May/June 2025 onwards and International A-level exams May/June 2026 onwards, published by OxfordAQA – section 3.1.7, Limited company accounts.