Financial Accounting and Reporting Essay Example | Topics and Well Written Essays - 2500 words

Financial Accounting and Reporting - Essay Example 4. Customers Customers use financial information to assess the financial position of a company and its ability to supply goods or services stably for a long period. 5. Employees Employees need to know the profitability of their company, its ability to remunerate them in the long term and to ensure their job security (Elliott, 2008). LEGAL REQUIREMENTS ON ACCOUNTS PREPARATION The accounts must be submitted to the tax authorities, corporation tax should be on the basis of the company’s profits. This is done at the end of the financial year. The company’s accounts must be made public by filling them in the house of companies (Horngren, 2002). They must be submitted by the company within nine months after the financial year end. The accounts must be accurate and directors have a legal responsibility of ensuring that the accounts are accurate. The use of an accountant does not reduce the responsibility (Webster, 2004). The financial statements that must be prepared include; balance sheet, profit and loss account, notes to the accounts, director’s report and auditor’s report. The balance sheet must be signed by the director, and a printed name of the director must be included (Horngren, 2002). The accounts should be prepared in conformity of internationally accepted financial reporting standards. DIFFERENCES BETWEEN PARTNERSHIP AND SOLE TRADER ACCOUNTS A sole trader’s earnings are subject to tax in the self-employment category while a partnership is subject to corporation tax (Elliott, 2008). The accounts of a sole trader seize to exist upon death of the trader while those of a partnership continue to exist since it is a legal person. A partnerships’ accounts contain capital comprised of shares of stock which are categorized into preference and ordinary shares (Webster, 2004). A sole trader’s account contains capital raised from other sources like from personal savings or soft loans. The partnership has to file its leg al accounts with the state while a sole trader’s account need not to be filed with the state (Horngren, 2004). A sole trader accounts mostly include incomplete financial records while a partnership must prepare financial statements in conformity with the statutory requirements. The accounts of a sole trader are usually voluntarily prepared while those of a partnership are a statutory requirement. ?'000' Stock ?'000' Balance b/d 4000          Cash balance 250 Balance c/f 4250       4250    4250    Bank Balance b/d 3310 Stock 250          Balance c/f 3060       3310    3310    Telephone Balance b/d 580          Accruals 82 Balance c/f 662       662    662    Advertising Balance b/d 3300 Prepaid 337       Balance c/f 2963    3300    3300             Wages Balance b/d 6650       Accrual 123 Balance c/f 6773    6773    6773             Motor Expenses Balance b/d 1460 Prepaid 42       Balance c/f 1418    1460    1460             Accountancy Fee Balance b/d 326 balance c/f 326    326    326             Debtors    Balance b/d 4500 depreciation 225       Balance c/f 4275    4500    4500             Doubtful Debts Balance b/d 120       Debtors 225 Balance c/f 345    345    345             Fixed Assets Balance b/d 24000 Depreciation 7700       Charge 4075       Balance c/d 12225    24000    24000             Depreciation Balance b/d 7700       Charge 4075 Balance c/d 11775    11775    11775 sherwood Trial balance As at 31.1.2013 Dr ?'000' Cr ?'000' Stock 4250 Sales 43000 Sales returns 980