Financial Accounting of Atlas Plc - Report
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Added on 2020-01-15
Financial Accounting of Atlas Plc - Report
Added on 2020-01-15
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FINANCIALACCOUNTING
Table of ContentsINTRODUCTION......................................................................................................................1TASK 1 .....................................................................................................................................1AC 1.2, 1.4 Legal and regulatory influence on financial statements and deal it byaccounting.........................................................................................................................1And reporting standards....................................................................................................1AC 1.1, 1.3, 3.1 Implication of legal and regulatory influences on the financial statementsfor......................................................................................................................................5Different users of the statements and their information need...........................................5PART A....................................................................................................................................10AC 2.1, 2.2, 3.2...............................................................................................................10a) Preparation of Adjusted Trial balance as on 30th June, 2011....................................10b) Preparation of Ella's income statement for the year ended on 30th June, 2011.........10c) Prepration of Ella's statement of financial position as on 30th June, 2011................11PART B....................................................................................................................................12AC 2.1, 2.2, 3.2..............................................................................................................12a) Atlas Plc's income statement starting from the operating profit.................................12b) Statement of comprehensive income for Atlas Plc ....................................................13c) Statement of financial position of Atlas Plc as on 31st January, 2011.......................13d) Impact of issuing ordinary shares of 10 million shares at 1.50 each on Bank, ordinaryshare................................................................................................................................14capital and share premium..............................................................................................14TASK 2....................................................................................................................................15PART A....................................................................................................................................15AC 4.1, 4.2......................................................................................................................15a) Calculation of ratios....................................................................................................15b) Interpretation of ratio with comparative analysis.......................................................16c) Memorandum report to the Ager Ltd's management..................................................17PART B....................................................................................................................................17AC 4.1,4.2 Calculation of investment ratios...................................................................17CONCLUSION........................................................................................................................18REFERENCES.........................................................................................................................19
Index of TablesTable 1: Preparation of Adjusted Trial balance of Ella's as at 30th June, 2011.......................10Table 2: Preparation of Ella's income statement for the year ended on 30th June, 2011.........10Table 3: Prepration of Ella's statement of financial position as on 30th June, 2011................11Table 4: Statement of financial position of Atlas Plc as on 31st January, 2011......................13
INTRODUCTIONFinancial accounting is a process of recording, summarizing, analysing andinterpreting the business transactions. The process mainly involves preparation ofprofitability statement and balance sheet to determine the operational results and financialstatus of the organization. Various users such as employees, managers, investors, lenders,suppliers, government and competitors make use of these statements to collect necessaryinformation. It helps to take effective business decisions. Generally accepted accounting principle (GAAP) are the set of guidelines thataccountant should follow in preparation of the statements. Furthermore, InternationalAccounting standards Board (IASB) issued International Financial Reporting Standards(IFRS). It is a framework of International Accounting Standards (IAS). IFRS explains thathow different type of transactions will be reported in company's accounts. Along with theaccounting standards, organization also has to follow some reporting standards for publishingtheir accounts. . In UK, number of reporting standards has been made for preparation andpresentation of financial statements. It provides great assistance to bring consistency andcomparability in the financial statements of different organizations which operates indifferent countries. Enterprises follow different accounting policies and principle to preparenecessary statements and fulfil the information need of various internal and externalstakeholders. TASK 1 AC 1.2, 1.4 Legal and regulatory influence on financial statements and deal it by accountingAnd reporting standardsA complete set of financial statement comprises statement of financial position(balance sheet), profit and loss account and statement of changes in equity, cash flowstatement and disclosure of notes. Accounting notes includes adopted accounting policies,principles, rules, standards and other information which not have been reported in thefinancial statements. For instance, contingent business liability must be shown in theaccounting notes. In United Kingdom, companies are obliged to prepare their accounts as per the legaland regulatory requirement. The framework has been explained here as under:Company act 1985: Initially, UK companies are strictly abided with the provisionsprescribed in Company Act, 1985. The act has been regulated by UK parliament and appliedon those companies who incorporated themselves under this act or any previous act.1 | P a g e
However, it has not been applied to other form of organization such as sole proprietorship,partnership and limited liability partnership. As per the act requirement, companies can beformed by registration and mainly govern the England, Wales and Scotland companies(Ledgerwood, 2014). Furthermore, the act indicated that Memorandum of Association(MOA) and Article of Association (AOA) are also an important document that governscompany's operations in a great manner. Companies Act, 1989: This act amended some provisions of previous CA, 1985 andimposes more regulations on the organizations. The act overcomes the drawbacks of previousenactment and makes improvement over it. In this act, new provisions have been made inrelation to registration charges, auditor’s responsibilities and govern company's accountingprocedure more effectively. Part IV and section 92-107 of the act covers the registrationregulations. Moreover, this act changed the laws regarding the power of obtaining necessaryinformation and investigation process. It provides excess powers to the overseas regulatoryauthorities. Companies Act, 2006: CA, 1985 has been replaced by CA, 2006. UK was the firstcountry who establishes rules and regulations on company's operations. This act was comeenforce on 8 November, 2006. It includes 1300 sections and governs UK company law. Asper the act requirement, companies must prepare their statements according to the provisionof Schedule 4. The schedule 4 prescribed a specific format in which financial statementshould be represented. It set out the rules for company formulation, registration, auditing ofthe financial statements, investigation of documents, members responsibilities, raisingbusiness capital, mergers, acquisition and takeovers and so on (Healy and Palepu, 2012). Theact simplified the incorporation process for new companies, provide more rights to theshareholders for suspected fraud and negligence and provide some relaxation to organizeannual generate meeting (AGM). Furthermore, the act provide more power to theshareholders for further investigation, According to the companies act, all the UK privateand public companies are legally obliged to prepare profit and loss account and balance sheetannually and publish these statements for the shareholders. Moreover, both the financialstatements must be audited by an independent auditor and attached with the publishedstatements. Auditor inspected the accounts in order to verify that statements represent true orfair position or not. It helps to provide correct and authentic information to the shareholdersand other stakeholders. In addition to it, some companies have to submit their financialstatements in front of company registrar. 2 | P a g e
Partnership Act, 1890: It is an act of UK Parliament applied to the partnership firmsonly. As per the act, partnership is a form of organization in which two or more person carryout the business functions with the objective of getting maximum return. The act governs thepartnership firms through various legal provisions. According to the act, partnership can beestablished by making agreements between partners. The agreement comprises partner'scapital contribution, profit sharing ratio, remuneration, interest on capital, interest on partner'sloan, interest on drawings, partner's liabilities, their powers and so on (Li, 2010). All thepartners are strictly abided by the decided agreement terms. Further, the act prescribedgoverning rules regarding admission of new partner, partner's retirement, death anddissolution of firm.European Union Directives: EU Council make legislative regulations, calleddirectives applied to all the European countries. The member countries of EU prepare theirfinancial statements through complying with the set EU directives (Nobes, 2014). Forinstance, 4th EU directives indicated the format and content which must be reported in thefinancial statements. 7th EU directives made legislative for consolidated financial statement ofgroup of companies whilst 8th EU directives mentioned Auditors' responsibilities,qualification and their regulations. International Accounting standards (IAS): IASB issued a number of accountingstandards for recording distinct business affairs in the company's accounts. It makes rules thathow transactions will be recorded in the statements. In UK, 41 IAS have been issued byIASB that for financial accounting. It includes presentation of financial statements,accounting for inventories, consolidated financial statement, accounting for depreciation,required disclosure, price changes accounting, preparation of cash flow statement, accountingpolicies, estimation and errors, research and development activities, construction costing,income tax, segment reporting, property, plant and equipment, revenues, lease, employeebenefits, borrowing cost, related party disclosure, investment and so on (Christensen andet.al., 2015). Thus, it can be said that IAS provide great guidance to the accountants forrecording every business transaction as per the legal requirement.Financial Reporting Standards for Smaller Entities (FRSSE): This reporting standardsset out the legislation for preparing and presenting the financial statements of smallercompanies (Ball, 2006). All the reporting business entities that prepare their statement inaccordance with FRSSE have not need to comply other regulatory reporting standards. Theprovisions have been amended much time. It has been revised in the year 2015, came intoforce since January, 2015. In context to micro-entities, the amendments allowed entities to3 | P a g e
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