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AAT Level 4 - Financial Statements Of Limited Companies > 1. Limited Companies > Flashcards

Flashcards in 1. Limited Companies Deck (13)
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1
Q

What what is the aim of financial statements?

A
  • to identify how well the business has performed
  • to identify the value of the assts and liabilities
  • to understand the cash flow position
  • to communicate information to the users of the accounts
2
Q

What are the advantages of trading as a limited company?

A
  • Limited liability status
  • Easier to raise finance
  • Company continues to operate regardless of the ownership
  • Taxed under corporation tax
3
Q

Why are the disadvantages of trading as a limited company?

A
  • Accounts submitted to companies house - anyone can access them
  • More regulation to comply with
  • Accounts of larger companies must be audited
  • Issues of shares highly regulated
4
Q

What financial statements are required for a sole trade or partnership?

A

Statement of profit or loss

Statement of financial position

5
Q

What financial statements are required for a company?

A
Statement of profit or loss
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
6
Q

What are the nominal value of shares?

A

The face value of the shares

Number of shares X nominal value

7
Q

What is the market value of shares?

A

The value at which existing shares can be traded

8
Q

What is the allotted share capital?

A

The shares that have actually been issued

9
Q

What are the main features of ordinary shares?

A
  • sometimes called equity shares
  • can give dividends, at the directors discretion
  • shareholders are entities to vote in a general meeting
10
Q

What are the main points of preference shares?

A
  • fixed rate dividend
  • dividend must be paid before any dividend to ordinary shareholders
  • do not have any voting rights
11
Q

How are dividends treated?

A

Always as a reduction to retained earnings and are deducted from the retained profit reserve.
Never an expense on the P/L

12
Q

What is the equation for retained earnings?

A

Retained earnings B/F. x
Current year profit. x
Less: Dividends. (X)

Retained earnings C/F. X

13
Q

Name some ‘other reserves’

A
  • Share Premium account
  • Revaluation Surplus
  • Capital Redemption Reserve
  • General Reserve