Behavioral Finance and Accounting Research

FINANCIAL
ACCOUNTING

Table of Contents
Introduction................................................................................................................................1
TASK 1......................................................................................................................................1
AC 1.2, 1.4 Influence of legal and regulatory framework on financial statements and
dealing....................................................................................................................................1
With the accounting and reporting standards.........................................................................1
AC 1.1, 1.2, 3.1 Implication of laws and regulatory framework for the different type of
users........................................................................................................................................4
And their information needs...................................................................................................4
TASK 2......................................................................................................................................6
PART B....................................................................................................................................10
A and B). Stating the operating profit for the year..............................................................10
c). Preparing the statement for the year ended 31st January 2011 for Atlas plc. In relation
to the assessment of financial performance.........................................................................11
d). Stating the impact on bank account, ordinary share capital and share premium when
Atlas plc issues 10 million ordinary shares at £1.5 per share..............................................12
CONCLUSION........................................................................................................................13
REFRENCES...........................................................................................................................14

INTRODUCTION
Every business organization needs to keep detailed record of all the operations. The
process of recording, classifying, summarizing and interpreting the financial information is
called financial accounting. The aim of this is to determine company's operational as well as
financial position. The present project report will discuss different legal and regulatory
framework for preparation of financial statements. The framework consists of different
accounting and reporting legislations and regulations in drafting company's accounts.
Company Act, 2006 and Partnership Act, 1890 imposed legal obligations to the businesses
while International financial reporting standard (IFRS), International Accounting Standards
(IAS), Generally Accepted Accounting Principles (GAAP) and Financial Reporting
Standards (FRS) comprises of all the regulatory framework of accounting and reporting.
Along with this, the report also explains the different internal and external users of financial
statement who make use of company's financial information and take decisions accordingly.
TASK 1
AC 1.2, 1.4 Influence of legal and regulatory framework on financial statements and dealing
With the accounting and reporting standards
Company Act, 2006: UK parliament formed CA, 2006 which govern all the UK
companies. UK company law covers 1300 sections and 16 schedules, came into force on
November, 2006. The act is applied to both private and public listed companies. It make
provisions regarding registrations, preparing necessary document such as MOA and AOA,
incorporation certificate, minimum share capital, directors duties, responsibilities and
liabilities, auditing of company's accounts, auditor's duties, shareholders information right
and so on. Section 386 of the act imposes legal restrictions on the organizations to keep
detailed and updated records of each and every accounting transaction (Arlbjørn and Freytag,
2012). Further, the section mentioned that the directors have to prepare required accounts in
compliance with the Article 4 of International Accounting standard (IAS). According to the
law, company have to maintain adequate records of business expenses, incomes, assets,
liabilities and inventories. Moreover, parent companies need to combine their subsidiaries
accounts and publish consolidated financial statement. In case when company do not
compliance with section 386, default officer can be penalised or imprisoned (Harun, Peursem
and Eggleton, 2012). Section 388 mentioned that companies have to kept records at their
registered office or at any other place which can be inspected by its officers. Section 393
described that directors must approve the financial statement about their truth and fair
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presentation. Furthermore, the act imposes legal obligations for publishing their audited
statements. Therefore, they need to appoint an independent auditor who can investigate
company's accounts and express his/her opinion by preparing qualified or unqualified report.
Section 395 described that company's accounts must be prepared in accordance with
applicable accounting framework and IAS. According to section 386 of the act, it is
compulsory for the accountants to prepare balance sheet and profit and loss account which
measure company's profits and financial status. (Gupta and Gunasekaran, 2005). The section
also imposes legal restrictions to use specific format and mention all the content in the
accounts. Moreover, additional information which has not been reflected by the statements
should be provided in the way of explanatory notes.
According to section 403, holding companies have to prepare their financial accounts
in compliance with article 4 of IAS regulations. Moreover, the standards will be consistently
followed in all the subsequent financial years. However, section 407 made provisions about
the reporting framework. As per the section, holding company directors must ensure that
parent and subsidiary company's accounts have been prepared using the same financial
reporting framework. Section 414 imposes legal liabilities on the board of directors to sign
and approve the financial statements (Nyamori, 2009). Section 495 of legislation is about the
auditor's report. According to this section, private company need to send auditor's report to
members while in case of public company, it must be presented in annual general meeting
(AGM).
Generally Accepted Accounting Standards (GAAP): These are the standard guidelines
which should be complied in preparation of company's accounts. It includes all the
accounting standards, rules, conventions and principles which should be strictly followed in
the process of financial accounting. It described the accounting procedure for recording,
classifying, summarizing and interpreting the financial statements. In UK, new GAAP came
into force on 1st January, 2015. UK FRC published four standards FRS 100, 101, 102 and 103
as new regime. FRS 100 is about the application of financial reporting requirement; FRS 101
is about reduced disclosure framework, FRS 102 is about interim reporting while FRS 103 is
applied on insurance contracts (Peursem, 2008). It makes changes in the disclosure,
measurement and transaction recognition.
International Accounting standards (IAS): International Accounting Standard
Committee (IASC) issued a number of IAS to record company's transactions in an
appropriate manner. IAS makes rules for recording various business affairs in the company's
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