Unit 3

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  • Created on: 23-01-18 18:11
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  • Unit 3
    • Source of finance
      • External
        • Bank - Loans, overdrafts and mortgages
        • Private equity capital
        • Public limited companies use venture capital
        • Business angles - wealthy individuals
      • Internal
        • Capital
        • Funds generated from profits
        • Funds provided by family
      • Limited company ordinary shares
        • Becomes capital for a business
        • Issued to investors in the company
        • Dividends paid in return
      • Limited company preference shares
        • Shares issued in return of a fixed paid dividend rate
        • Used to obtain finance
    • Incomplete records
      • Drawbacks  =
        • Accountant time = increased cost
        • Lak of up to date information = isn't reliable
        • Innacurate = items missed
        • Loss/theft
      • Statement of affair
        • Calculates capital
        • Assets- Liabilities = capital
        • Capital at the end of year - capital at the star of year = retained profit + drawing = profit for the year
      • Cash book summary
        • Used to find cash and bank balance at the start and end of the year
        • Uses the bank statement to produce a summary of receipts and payments
        • Credit side = overdraft
        • Receipts = debit side
        • Payments, Drawings and expenses = credit side
      • Inventory loss
        • Purchase and opening inventory = avaliable inventoy
        • Sales - gross profit = Cost of sale
          • Available inventory - Cost of sales
            • Purchase and opening inventory = avaliable inventoy
            • - value of inventory remaining = value of lost inventory
      • Expenses control account
        • Bank and cash payments during the year - accruals at the beginning + payments at the beginning + accrual as the end - prepayments at the end = expenses for the year
        • Accrual - debit balance
        • Prepayment - credit balance
      • Purchase and sales control account
        • Payments to TP in year - TP at beginning - TP at the end = purchases for the year
        • Reciepts to TR - TR at beginning + TR at the end = Sales for the year
      • Gross mark up and margin
        • Mark up = profit percentage added to buying/cost price
          • Eg; COS = 20000. Mark up = 20%. 20000/100 X20 = 240000 (Sales)
        • Margin = percentage profit based on selling price
          • Eg; Sales = 300000. Margin =20%. OI = 20000, CI = 30000. GP = 300000/100 X20 = 60000. 300000-60000 = 240000. 240000 + 30000 - 250000 (Purch)
    • IAS
      • Ias 2 = inventory
        • Valued at lowest of net realiasabl or cost
          • Net realisable = estimated selling price - cost of repairs
      • IAS 8 = accounting policies, changes in estimates and errors
        • Policies must be consistent
      • IAS 10 = events after reporting period
        • Adjusting events = events after reporting but before being published
        • Non-adjusting events = events after the reporting period but don't effect final accounts
      • IAS 16 = property plant and equipment
        • Recognises asset, depreciation and measurement
      • IAS 18 = revenue
        • Sales of goods, interest, dividends and rent received
      • IAS 36 = impairment of assets
        • Assets measured at fair and true value
      • IAS 37 = provisions, contingent liabilities and assets
        • Provision = liability with unknown time and amount
        • Contingment liability = possibilbe obligation that are not probable
      • IAS 38 = intangible assets
        • Value of the future asset estimates
          • Measured reliably
    • Cash flow statements
      • Users
        • Shareholders
          • Shoes liquidity
            • Trade payables
        • Loan holder
          • Cash avaliablity
        • Trade payables
        • Managers
          • State of fiances
            • Long term planning
    • Published accounts for limited companies
      • SONCA
        • Charge for the year uses new assets, old asset and sold asset
        • Cost = Opening balance + additions - disposals + revaluation = closing balance
        • Depreciations = charge for the year - eliminated on disposal and revaluation = closing balance
      • Directors report
        • contains key activities, previous accounting period, info on the future and who the directors are
      • Auditors report
        • contains responsibilities, prepared correctly, true and fair value, consistency and qualified
      • Statutory accounts
        • Must be done
        • Required under company law and a copy has to be filled with a  reistr of companies
      • Directors
        • Run the company on shareholders behalf
        • Main criteria in companies act 2006
          • True and fair value and at any point produce financial position
          • Act within powers and promote success
      • Ias 1
        • "Provide information about the financial position, performance and cash flows for users of economic decisions"
        • Concepts of going concern, accruals and consistency
      • Dividend within financial statement
        • 1. directors propose new dividend. 2. 6-8w later annual general meeting. 3. dividend paid. 4. interim dividend. 5. propose dividend

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