Unit 3
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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
- External
- 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
- Available inventory - Cost of sales
- 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)
- Mark up = profit percentage added to buying/cost price
- Drawbacks =
- IAS
- Ias 2 = inventory
- Valued at lowest of net realiasabl or cost
- Net realisable = estimated selling price - cost of repairs
- Valued at lowest of net realiasabl or cost
- 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
- Value of the future asset estimates
- Ias 2 = inventory
- Cash flow statements
- Users
- Shareholders
- Shoes liquidity
- Trade payables
- Shoes liquidity
- Loan holder
- Cash avaliablity
- Trade payables
- Managers
- State of fiances
- Long term planning
- State of fiances
- Shareholders
- Users
- 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
- SONCA
- Source of finance
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