OxfordAQA IGCSE Accounting: Internal financial statements of limited companies (9215)

This guide is aligned to the OxfordAQA International GCSE Accounting (9215) specification, version 1.2, for exams from May/June 2026 onwards. It covers the limited companies row of specification section 3.4, Preparation of financial statements. Content 3 to 5 is the content assessed in Paper 2: Financial Statements, so this topic sits in that paper. The specification does not split the content into tiers.

Work through it with the revision notes and the practice questions. The OxfordAQA IGCSE Accounting course hub and the printable accounting checklist cover the rest of the course. If you are unsure where you stand, take a free 10-minute diagnostic first.

All amounts on this page are in dollars. Every business and figure is invented.

What the specification asks for

Specification wording	What you must be able to do
Prepare and comment on the internal financial statements of limited liability companies	Produce an income statement and a statement of financial position, then explain what they show
The statements are income statements and a statement of financial position	Know both statements and where each figure goes
These statements are for internal use and not for publication	Know the statements here are internal ones
Five sub-headings in the statement of financial position	Use non-current assets, current assets, equity, non-current liabilities, current liabilities
Distinguish between share capital and loan capital	Explain the difference and show each in the right place
Not examined	Statement of changes in equity, preference shares, general reserves, rights issues, bonus issues, revaluation of non-current assets

The adjustments you already use for sole traders still apply to a company: accruals, prepayments, depreciation, provision for doubtful debts, irrecoverable debts and closing inventory. The company layout is different, but the arithmetic is the same.

Limited companies in brief

A limited company is owned by shareholders. Its owners’ liability is limited, so a shareholder can lose what they paid for their shares but is not personally liable for the company’s debts. This is the main advantage over a sole trader or partnership. The company can also raise money by selling shares to more people. The disadvantages are that the owners have less control when there are many shareholders, and a company has more rules to follow than a sole trader.

For this specification the statements are prepared for internal use. They are not the published accounts, so you do not need to follow a publication format. You need clear headings, correct classification and correct totals.

Share capital and loan capital

Both bring money into the company. They are not the same thing.

	Share capital	Loan capital
Who provides it	Shareholders, who are the owners	Lenders, such as a bank or debenture holders, who are not owners
Return paid	Dividend, paid from profit and not guaranteed	Interest, paid at a set rate whether or not there is a profit
Repayment	Not normally repaid to shareholders while the company trades	Repaid on an agreed date
Where it appears	Equity	Non-current liabilities (current liabilities once repayable within a year)
Effect on profit	Dividends are not an expense	Interest is an expense that reduces profit for the year

Dividends are a distribution of profit to owners. They are deducted from retained earnings, not from the income statement expenses. Loan interest is a cost of borrowing, so it appears in the income statement.

Retained earnings are the profits kept in the business over time. They are added to share capital to give equity. The specification does not list this term separately, so use whatever label your teacher uses for the profit kept in the business.

The income statement

The income statement is built in the same order as a sole trader’s: revenue, cost of sales, gross profit, expenses, operating profit. Two company features come after operating profit. Loan interest is deducted to reach profit for the year, and a short working below shows how that profit and any dividend change retained earnings.

The statement of financial position and its five sub-headings

Group each balance under one of the five sub-headings.

Sub-heading	What goes in it	Examples
Non-current assets	Assets kept to use for more than a year, shown at cost less accumulated depreciation	Land, equipment, vehicles
Current assets	Assets that become cash within a year	Inventory, trade receivables less provision, prepayments, bank balance
Equity	The owners’ stake	Share capital, retained earnings
Non-current liabilities	Debts due after more than one year	Loan repayable in several years
Current liabilities	Debts due within one year	Trade payables, accruals, bank overdraft

The two sides balance: non-current assets plus current assets, less current liabilities and non-current liabilities, equals equity. You can also total assets on one side and equity plus liabilities on the other.

Worked example: Avenmoor Cycles Ltd

Avenmoor Cycles Ltd sells bicycles. Its year ends on 31 December 2026. The trial balance after the first stage of the books is as follows.

Account	Debit	Credit
Land	300,000
Equipment at cost	80,000
Provision for depreciation of equipment		24,000
Inventory at 1 January 2026	38,000
Purchases	412,000
Revenue		690,000
Trade receivables	46,000
Trade payables		31,000
Bank	22,000
Wages	96,000
Insurance	14,400
General expenses	33,600
Loan interest paid	3,000
Dividends paid	20,000
10% loan, repayable in 2030		60,000
Ordinary share capital		250,000
Provision for doubtful debts		1,200
Retained earnings at 1 January 2026		8,800
Totals	1,065,000	1,065,000

Adjustments at 31 December 2026:

1. Closing inventory is 41,500.
2. Insurance of 1,200 has been paid in advance.
3. Wages of 3,000 are owing.
4. Loan interest of 3,000 is owing for the second half of the year.
5. Equipment is depreciated at 10% a year on cost, straight line. Land is not depreciated.
6. The provision for doubtful debts is to be 5% of trade receivables.

Step 1: work out each adjustment

• Depreciation: 10% of 80,000 = 8,000. Accumulated depreciation becomes 24,000 + 8,000 = 32,000, so the net book value is 48,000.
• Provision: 5% of 46,000 = 2,300. The old provision was 1,200, so the increase of 1,100 is an expense.
• Insurance: 14,400 less 1,200 prepaid = 13,200 expense.
• Wages: 96,000 plus 3,000 owing = 99,000 expense.
• Loan interest: 3,000 paid plus 3,000 owing = 6,000, which is 10% of 60,000.

Step 2: the income statement

Avenmoor Cycles Ltd
Income statement for the year ended 31 December 2026

Revenue                                          690,000
Opening inventory                 38,000
Purchases                        412,000
                                 450,000
Less closing inventory            41,500
Cost of sales                                    408,500
Gross profit                                     281,500
Expenses
  Wages                           99,000
  Insurance                       13,200
  General expenses                33,600
  Depreciation of equipment        8,000
  Increase in provision for
    doubtful debts                 1,100         154,900
Operating profit                                 126,600
Loan interest                                      6,000
Profit for the year                              120,600

Retained earnings
Balance at 1 January 2026                          8,800
Profit for the year                              120,600
Less dividends paid                               20,000
Balance at 31 December 2026                      109,400

Step 3: the statement of financial position

Avenmoor Cycles Ltd
Statement of financial position at 31 December 2026

Non-current assets          Cost   Acc. dep.     NBV
Land                     300,000          0   300,000
Equipment                 80,000     32,000    48,000
                         380,000     32,000   348,000

Current assets
Inventory                                       41,500
Trade receivables                  46,000
Less provision for doubtful debts   2,300       43,700
Prepayment                                       1,200
Bank                                            22,000
                                               108,400
Total assets                                   456,400

Equity
Ordinary share capital                         250,000
Retained earnings                              109,400
                                               359,400
Non-current liabilities
10% loan, repayable 2030                        60,000
Current liabilities
Trade payables                     31,000
Accruals (wages 3,000, interest 3,000) 6,000    37,000
Total equity and liabilities                   456,400

Both sides total 456,400, so the statement balances. If it did not, check the retained earnings working first, because that is where company statements most often go wrong.

Step 4: comment on the results

Comments need figures and a judgement, not only a description. For Avenmoor:

• Gross profit is 281,500 on revenue of 690,000, a margin of 40.8%. Profit for the year is 120,600, which is 17.5% of revenue.
• Current assets of 108,400 cover current liabilities of 37,000 about 2.9 times, so the company can pay its short-term debts.
• The loan of 60,000 is 14.3% of the loan plus equity, so most of the finance comes from the owners and retained profit. Profit from operations covers the loan interest of 6,000 about 21 times.
• Dividends of 20,000 are a small share of profit for the year, so most profit is kept in the business.

The specification asks you to comment on the statements but does not list ratio formulas for this row, so use only the measures your course teaches. Always compare with a previous year, a target or another business if the question gives one, and say what the figure means for owners, lenders or managers.

What is not examined

For limited companies, the specification states that these will not be examined: statement of changes in equity, preference shares, general reserves, rights issues, bonus issues and the revaluation of non-current assets. You can leave all of them out of your preparation. A question will therefore use ordinary share capital, and any change in equity comes only through profit for the year and dividends in the retained earnings working.

Common errors

• Putting dividends in the income statement expenses. They reduce retained earnings only.
• Leaving loan interest out, or using the amount paid and forgetting the amount owing.
• Showing the whole loan as a current liability when it is repayable in 2030. It stays non-current until it falls due within a year.
• Depreciating land.
• Adding the provision for doubtful debts to expenses instead of only the change in it, and showing the full provision as an expense each year.
• Taking the closing inventory off the expenses instead of off the cost of sales.
• Putting accruals in current assets, or prepayments in liabilities.
• Writing a comment that restates a number without saying what it means.

Next steps

Use the revision notes for fast recall, then try the practice questions with the answers covered. For the other forms of organisation, see the course hub. Tick off what you can do on the checklist, and use the diagnostics to find weak spots.

Frequently asked questions

What is the difference between share capital and loan capital? Share capital is provided by shareholders, who are the owners, and earns a dividend paid from profit that is not guaranteed. Loan capital is provided by lenders such as a bank or debenture holders, earns interest at a set rate whether or not there is a profit, and is repaid on an agreed date.

Are these the company’s published accounts? No. For OxfordAQA International GCSE Accounting 9215 the statements are prepared for internal use, not as the published accounts of the company.

What are retained earnings? Retained earnings are the profits kept in the business over time. They are added to share capital to give total equity.

What is not examined for limited companies in OxfordAQA 9215? The specification states that the statement of changes in equity, preference shares, general reserves, rights issues, bonus issues and the revaluation of non-current assets will not be examined for limited companies.

Is land depreciated in company statements? No. Depreciating land is a common error; depreciation is charged on the other non-current assets.

Official syllabus

OxfordAQA International GCSE Accounting (9215), version 1.2, for International GCSE exams May/June 2026 onwards, published by OxfordAQA. This guide covers section 3.4, limited companies.