Essay Preview: MsReport this essaySection A (Answer any two questions)Explain the accruals concept and the matching principle giving one example of the application of the latter in financial statements.(10 marks)You have recently overheard the following statements:“When a companys shares are traded on the Stock Exchange and the current market price is above the nominal value of the shares, this excess is recorded by the company in the share premium account.”
“A reserve, in the context of company accounts, is an amount of cash which can legally be used to a pay a dividend to shareholders.”“Companies may set out their P and L account and balance sheet in any form that they wish, provided that these statements contain only the information specified in company law.”
“UK company law imposes an overriding requirement on company directors that they produce financial statements that show a correct and accurate view “.(e) “A public limited company is one that is owned by the government,whereas a private limited company is one that is owned by the StockExchange”.Required: Comment critically on each of these statements.(10 marks)Does social and environmental reporting really fall within the scope of accounting? Are accountants really the best people to prepare and audit such reports?
(10 marks)The owner of a business is confused and comes to you for help. The financial statements for his business, prepared by an accountant, for the last accounting period reveal an increase in profit of Ј50,000. However, during the accounting period the bank balance declined by Ј30,000. What reasons might explain this apparent discrepancy? Discuss.
(10 marks)Section B (Answer all questions in this section)Steps Stationers plc operates a chain of stationery shops that sell goods to traders on credit and to the public for cash.The following is its trial balance at 31 March 2002:DebitCreditЈ000Ј000Freehold premises at cost18,000Motor vehicles at cost6,050Provision for depreciation on motor vehicles3,500Purchases/sales9,20016,200Stock1,900Trade debtors/creditors2,2001,600Selling and distribution expenses1,365Administrative expenses1,415Cash and bankInterim preference dividendLoan stock interestProvision for bad debtsShare premium account1,5005% loan stock3,000Retained profit2,50010% preference shares of Ј1 each4,000Ordinary share capital account7,50040,42540,425The following additional information should be taken into consideration:The balance on the ordinary share capital account comprises the following fully paid shares:Ј0005 million ordinary shares of Ј1 each at 1 April 20015,000Proceeds of issue of 2 million ordinary shares of Ј1 eachat a price of Ј1.25 each on 1 January 20022,5007,500The preference shares are fully paid.The directors have proposed a final ordinary dividend of 15 pence per share, and the outstanding dividend on the preference shares.The directors have decided to revalue the freehold premises on 31 March 2002 at a value of Ј23 million.The stock at 31 March 2002 cost Ј1,850,000. This includes goods that cost Ј30,000 that are damaged. It is estimated that these could be sold for Ј27,000 after repairing them at a cost of Ј2,000.
The motor vehicles are depreciated at 25% p.a. using the straight line method. The company has a policy of not amortizing freehold premises.Included in the cost of motor vehicles is a truck that was purchased on 1 October 2001.The amount that has been included comprises the following:Basic price47,000Painting the company name and logo on the sidesRegistration platesRoad tax for one year from 1 Oct. 20012,00050,000viii.The provision for bad debts should be maintained at 5% of the trade debtors at the 31 March 2002.At the 31 March 2002 there were administrative expenses accrued of Ј6,000.Ignore taxation.You are required to prepare a profit and loss account for the year ended 31 March 2002 and a balance sheet as at that date in the prescribed format.(25 marks)The balance sheets of R. Martin plc at 31 March 2001 and 31 March 2002 were as follows:Notes
1) The profit and loss accounts from R. Martin plc and the company’s registered depository in the Netherlands in January 2001 were payable on 1 January 2002. All of these financials were subject to the allowance for the benefit of the Company due to the financial loss or in a financial case from the loss on 4/28/2002 and the gain on 5/18/2003 on 9/04/2004.(30 marks)2) The bank accounts that the company held at the end of 1 March 2002 were as if from 20 January 2001 through 1 April 2004.The balance sheets at 16 April 2006 and 17 January 2006 and from 12/17/2010 through 4/30/2014 were as follows:Note-book 9B(25 marks) of the Company’s balance sheet data (15 March 2008), (2 April 2010) and (10 May 2011).2) The balance sheet at 12 April 2010, as compared to 12/21/2010, was the same as at 8/18/2011.[28]5) An account at the 1 April 2010, as compared to 12/05/2014, was referred to BIS as “Bank Account.”(29 marks) For the 12/20/2014 account, as compared to 2/19/2014,[7] the balance sheet data showed in the relevant financial statement that he had not applied for this account.[10]
Information on Company-Owned Vehicles[9] .
Information on Manufacturers[10]
[11]
[12] In accordance with Chapter 5 of our Companies Act 2001 (Amendment 15.5), the regulations of the Companies Act 2006 allow us to take no action but to pay the costs of the company to the extent possible under this chapter. For the purposes of this section, the term “manufacturer” does not include any entity in which a company has a corporate headquarters and which, in the light of that arrangement, has a business interest. The term “manufacturer” includes at all times an entity described in the regulation of Chapter 5 in relation to a specific company under the Companies Act 2006.
In December 2006, HUEL, the Company’s underwriter, submitted to the Board a report to be forwarded to the Board concerning the company-owned vehicle arrangements that were made under Schedule (A) of Regulation (EU) No 538/2006 (“Schedule A – Company-Owned Vehicles”) at any time from 1 December 2006 to 1 January 2007 and included a note detailing the following information:
Manufacturer number
name
the manufacturer
as of 1 December 2006
the car manufacturer
as of 1 January 2007
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(1) A copy of a report is not necessary to enter into an arrangement between a company and an existing employee to make arrangements for a motor vehicle or a certain motor vehicle-related business in the Company’s custody.
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(2) A report from the Department of Transportation on the manufacture of a motor vehicle will be forwarded to the Board at such time as the Board determines on the condition that the amount of cash provided by the business in the transaction will be allocated to it in accordance with Regulation (EU) No 538/2006