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Financial Accounting and Reporting - Essay Example

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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 ...Show more
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Summary

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)…
Financial Accounting and Reporting
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