4. Customers Customers use financial information to assess the financial position of a company and its ability to supply goods or services stably for a long period. 5. Employees Employees need to know the profitability of their company, its ability to remunerate them in the long term and to ensure their job security (Elliott, 2008). LEGAL REQUIREMENTS ON ACCOUNTS PREPARATION The accounts must be submitted to the tax authorities, corporation tax should be on the basis of the company’s profits. This is done at the end of the financial year. The company’s accounts must be made public by filling them in the house of companies (Horngren, 2002). They must be submitted by the company within nine months after the financial year end. The accounts must be accurate and directors have a legal responsibility of ensuring that the accounts are accurate. The use of an accountant does not reduce the responsibility (Webster, 2004). The financial statements that must be prepared include; balance sheet, profit and loss account, notes to the accounts, director’s report and auditor’s report. The balance sheet must be signed by the director, and a printed name of the director must be included (Horngren, 2002). The accounts should be prepared in conformity of internationally accepted financial reporting standards. DIFFERENCES BETWEEN PARTNERSHIP AND SOLE TRADER ACCOUNTS A sole trader’s earnings are subject to tax in the self-employment category while a partnership is subject to corporation tax (Elliott, 2008). The accounts of a sole trader seize to exist upon death of the trader while those of a partnership continue to exist since it is a legal person. A partnerships’ accounts contain capital comprised of shares of stock which are categorized into preference and ordinary shares (Webster, 2004). A sole trader’s account contains capital raised from other sources like from personal savings or soft loans. The partnership has to file its legal accounts with the state while a sole trader’s account need not to be filed with the state (Horngren, 2004). A sole trader accounts mostly include incomplete financial records while a partnership must prepare financial statements in conformity with the statutory requirements. The accounts of a sole trader are usually voluntarily prepared while those of a partnership are a statutory requirement. ?'000' Stock ?'000' Balance b/d 4000 Cash balance 250 Balance c/f 4250 4250 4250 Bank Balance b/d 3310 Stock 250 Balance c/f 3060 3310 3310 Telephone Balance b/d 580 Accruals 82 Balance c/f 662 662 662 Advertising Balance b/d 3300 Prepaid 337 Balance c/f 2963 3300 3300 Wages Balance b/d 6650 Accrual 123 Balance c/f 6773 6773 6773 Motor Expenses Balance b/d 1460 Prepaid 42 Balance c/f 1418 1460 1460 Accountancy Fee Balance b/d 326 balance c/f 326 326 326 Debtors Balance b/d 4500 depreciation 225 Balance c/f 4275 4500 4500 Doubtful Debts Balance b/d 120 Debtors 225 Balance c/f 345 345 345 Fixed Assets Balance b/d 24000 Depreciation 7700 Charge 4075 Balance c/d 12225 24000 24000 Depreciation Balance b/d 7700 Charge 4075 Balance c/d 11775 11775 11775 sherwood Trial balance As at 31.1.2013 Dr ?'000' Cr ?'000' Stock 4250 Sales 43000 Sales returns 980
Cite this document
(“Financial Accounting and Reporting Essay Example | Topics and Well Written Essays - 2500 words”, n.d.)
Retrieved from https://studentshare.net/finance-accounting/115066-financial-accounting-and-reporting
(Financial Accounting and Reporting Essay Example | Topics and Well Written Essays - 2500 Words)
“Financial Accounting and Reporting Essay Example | Topics and Well Written Essays - 2500 Words”, n.d. https://studentshare.net/finance-accounting/115066-financial-accounting-and-reporting.
Cited: 0 times
ACCOUNTS (Author’s name) (Institutional Affiliation) USERS OF FINANCIAL INFORMATION 1. Investors Investors use financial information to analyze the value of their investment in a company. They want to ensure that returns from their investment is reasonable and profitable before making any further investment (Elliott, 2008)…
Answer The international accounting standards are developed and issued by the International Accounting Standards Board (IASB). The IASB came into existence by replacing the International Accounting Standards Committee (IASC) in the year of 2001 (IAS Plus, web).
Now electronic spreadsheets are available which can be run in personal computers. The boxes in the spreadsheets called cells can be filled with texts and numbers. The values in these cells can be manipulated by the computer using mathematical functions. Combination of the mathematical functions gives rise to further complex formulae.
External users rely on the information presented by the company since they do not have contact with a company’s day to day operations (Warren, 2012). Following are the users of a company’s financial accounts: Debt holders and bondholders: The creditors of the company use financial accounts to conduct risk analysis of a company.
Earlier, in the absence of a fixed set, various organisations followed their own practices framed according to their own convenience. This dissimilarity in the accounting policies resulted in various problems and thus made it
It is the presentation of financial data relating to the performance, position as well as the flow of assets in a given accounting period which is then conveyed to different users of accounting information in order to facilitate their decision-making process. The sole objective
uch information is subject to different laws and regulations in various countries, which influence the content and the format for preparing the financial statements. In response to the existence of different accounting practices, the International Accounting Standard has