Lecture 7 company accounts PDF

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Week 9 company accounts

Stage 1 For the Company Accounts question you should review

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The type of organisation

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The year end date

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The notes to the accounts

Stage 2: trial balance

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Pencil beside each TB entry where you are going to put it in the financial statements (DEAD CLIC)

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Check bank figure – is it an asset (debit) or a liability (credit) ?

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Check share capital – need number of shares for dividend calculations

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Check debentures – interest rate and repayment date. If interest not yet fully paid then you MUST make an accrual. Repayment date will help determine current or non-current liability

Stage 3: notes to accounts •

Review each note and prepare the necessary journal entries (debits and credits) as they will be EXTREMELY helpful in preparing the financial statements.

Stage 4: FS preparation •

You are now ready to prepare the company’s financial statements

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You should use each figure in the trial balance ONCE and each figure in the notes to accounts TWICE (one debit and one credit)

Stage 5 expenses •

Prepare the company’s expenses schedule.....allocating the expenses between cost of sales (production or bought-in costs), selling & distribution and administration

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Remember that finance costs (interest payable) have their own line on the income statement

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As soon as you use a figure anywhere then SCORE it out !

Stage 6: income statement

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Complete the income statement to arrive at profit for the year by adding revenue, the three expense totals calculated above, the finance costs and the tax charge

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Remember to look for three possible components of the tax charge. CT for this year, over/under provision from previous year and movement on deferred tax provision

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As soon as you use a figure anywhere then SCORE it out !

Stage 7: retained earnings

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Complete the Statement of Retained Earnings by using opening retained earnings, profit for the year and dividends paid to arrive at closing retained earnings

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If there is a proposed dividend at the end of the year then include as a note under the income statement

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As soon as you use a figure anywhere then SCORE it out !

Stage 8: balance sheet

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Complete the balance sheet by categorising assets between non-current and current and liabilities between current and non-current....note the order

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Total assets – total liabilities = equity

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Equity = share capital plus all the reserve accounts

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As soon as you use a figure anywhere then SCORE it out.....by the time you’ve completed the balance sheet you should have used ALL the figures !...