Company Accounts


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Company Accounts

  1. 1. Higher Accounting Mr Arthur
  2. 2. Aims of the Lesson <ul><li>Why do we create Accounts? </li></ul><ul><li>What does Accounting Involve? </li></ul><ul><li>Who is Interested in the Accounts of a Business? </li></ul><ul><li>Financial V Management Accounting </li></ul>
  3. 3. Why do we Create Accounts?? <ul><li>To calculate profit or loss </li></ul><ul><li>To try and cut expenses </li></ul><ul><li>For the tax man!! </li></ul><ul><li>To work out overall value of the business </li></ul><ul><li>To work out partnership’s share </li></ul><ul><li>To check if figures are correct </li></ul><ul><li>Legal requirement </li></ul><ul><li>To budget for future planning </li></ul><ul><li>To attract shareholders </li></ul><ul><li>To work out which areas are suffering and which are prospering </li></ul>
  4. 4. What does Accounting Involve? <ul><li>Identifying and recording information </li></ul><ul><li>Classifying and measuring – grouping sales, costs etc </li></ul><ul><li>Communicating and explaining </li></ul>
  5. 5. Who is Interested in Accounting Information?? <ul><li>Potential Investors </li></ul><ul><li>Shareholders </li></ul><ul><li>Bankers </li></ul><ul><li>Owners </li></ul><ul><li>Taxman </li></ul><ul><li>Members </li></ul><ul><li>Employees </li></ul>
  6. 6. Financial Accounting <ul><li>These accounts present a historical record of the company and are backward looking </li></ul><ul><ul><li>Trading Profit and Loss </li></ul></ul><ul><ul><li>Balance Sheet </li></ul></ul><ul><ul><li>Income and Expenditure Account </li></ul></ul><ul><ul><li>Receipts and Payment Account </li></ul></ul><ul><li>Accounts are for external purposes – shareholders, employees etc </li></ul><ul><li>Financial accounts are a legal requirement </li></ul><ul><li>These accounts are unsuitable for planning, control and decision making </li></ul>
  7. 7. Management Accounting <ul><li>Management Accounts are not for publication </li></ul><ul><li>Accounts provide recent, current and future estimates of performance </li></ul><ul><li>Useful for Management to develop business strategies </li></ul><ul><li>Not legally required </li></ul>
  8. 8. Aims of the Lesson <ul><li>Last Lesson </li></ul><ul><li>Why do we create Accounts? </li></ul><ul><li>What does Accounting Involve? </li></ul><ul><li>Who is Interested in the Accounts of a Business? </li></ul><ul><li>Financial V Management Accounting </li></ul><ul><li>Today’s Lesson </li></ul><ul><li>Documents of trade </li></ul><ul><li>The document trail </li></ul><ul><li>Research of accounting terms </li></ul>
  9. 9. Documents of Trade <ul><li>A business transaction occurs when goods or services are provided. </li></ul><ul><li>Cash transaction = goods are purchased and paid immediately </li></ul><ul><li>Credit transaction = goods are purchased and paid for at a later date </li></ul>
  10. 10. The Document Trail
  11. 11. Accounting Terms to Research <ul><li>Invoice </li></ul><ul><li>Trade Discount </li></ul><ul><li>Cash Discount </li></ul><ul><li>Value Added Tax </li></ul><ul><li>Credit Note </li></ul><ul><li>Statement of Account </li></ul><ul><li>Receipts </li></ul><ul><li>Credit/Debit card </li></ul><ul><li>Dishonoured Cheque </li></ul><ul><li>Bad debt </li></ul>
  12. 12. Structure of the Course <ul><li>Role of Financial Accounting in business </li></ul><ul><li>Introduction to accounting standards — SSAPs and FRSs </li></ul><ul><li>Characteristics of business organisations </li></ul><ul><li>Preparation of manufacturing accounts </li></ul><ul><li>Features of ownership, funding, management, liability and control for an organisation </li></ul><ul><li>Preparation of final accounts of business organisations; sole traders; partnerships and plcs </li></ul><ul><li>Correction of errors and updating of final account figures </li></ul><ul><li>Analysis and interpretation of accounting information </li></ul><ul><li>Preparation of not-for profit final accounts </li></ul>
  13. 13. Final Accounts – Key Terms <ul><li>Prepayments </li></ul><ul><ul><li>An amount paid during this financial year for the next financial year, e.g. paying in advance </li></ul></ul><ul><li>Accruals </li></ul><ul><ul><li>An expense which you have not managed to pay this financial year, which will spill into next year </li></ul></ul><ul><li>Depreciation </li></ul><ul><ul><li>This is the amount you are setting aside due to Assets reducing in value </li></ul></ul><ul><li>Bad Debts </li></ul><ul><ul><li>This is the amount of money you write of as you debtor is unable to pay you </li></ul></ul><ul><li>Provision for doubtful debts </li></ul><ul><ul><li>This is usually a percentage of your debtors for the year, Incase they cannot pay you back </li></ul></ul>