Necessity Of An Organizations Year End Financial Statement Accounting Essay


Accounting standards are the principle or rules used as references to control the day-to-day accounts of each business association. SOME MORE. If the financial statements are not complying with provisions under those acts and standards, the financial statements are not giving a true and fair view to various user and no longer useful for them.

In preparation of financial statement, there is a structure for all the officers as a references according International Accounting Standard 1. International Accounting Standard 1 Presentation of Financial Statements contains few of fundamentals of accounting principles for the person who prepare those statements to concern. Fair presentation is one of the main concepts for preparation of statements. Financial statements have to be present fairly by disclosure the additional notes which could give a more details for certain part inside the financial statements.

Accruals concepts, also defined as matching concepts, mean all the expenses, income, assets, liabilities which is occur in the current years have to write to the books and recognize them in the year it occur. For example: The rental need to be recognized in full year although the rental for December was due and pay January the next accounting period. Rental of December have to be recognized as a costs for the current year to set off against the income that had contributed.

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An additional concept of this is historical cost concepts. Every asset has to be stated the historical cost as what had incurred in statement of financial position in always. The cost of asset have to stated according the historical cost unless the assets have some issue about the measurement of value of asset had dropped and required to be reviewed for impairment under International Accounting Standard 36 Impairment of Asset. Another concepts related to this concepts is consistency concepts. The presentation of every items in financial statement essential to be retained form from the started period until next at least there some changed have made under measurement by management.

For the intention to protect the shareholder's wealth maximization, disclosure of notes are always attach together with the financial statements. The purpose for International Accounting Standards 24 Related party disclosure is to indicate the person or entity who related to the company. This standard is to prevent to prejudicial transaction with the related party. Prejudicial on loan can be borrowing at a higher or lower market rates, Lending without any agreement state the date of return or a lend to related party there is no carry any marketable benefits to company.

Share Capital is a section show the total capital that had received from the shareholder by issued kinds of shares. In Statement of Financial Position, share capital is shown under category of equity. On this section, the organization have to stated every terms in full and whoever failure to do so are counted as offences beside the acts. Authorized capital is the start-up capital authorized to rise by issuing shares for a registered company, the nominal amount of the capital has to be stated in memorandum. However, authorized capital not a "capital" of an organization only stated the maximum amount for an organization can be issue to the public.

Other than that, ordinary shares and preferences shares should state clearly with the full amount that had issued and paid fully by the shareholder. An ordinary shareholder usually have the fully right to vote on per share basis in the general meetings. In contrast, preferences shareholders have no right to vote but have the priority to receive dividend declare which under the act. For example, a company with 20,000 6% preferences shares with £30.00 par value and 80,000 ordinary shares with £1.00 par value, the directors had decided to declared dividends of £100,000 in total, the 6% preferences shareholder would receive £36,000 (6% x £30.00 x 20,000 shares) in total, the remaining dividends only divided into the total number of the ordinary shares. SOME MORE.

According to the Act, any shares had issued at premium, a shares paid exceed the par value of the share; the Act CA 2006 section 610 required the sum of the premium of the shares have to transferred to a account named share premium account. However, under the Section 830, the share premium account may be applied on issue the fully paid bonus shares from the company unissued shares to the existing shareholders and paying the balance of the shares which have issued to the shareholder but unpaid previously. Share premium account could use as a dividend payment that had approved by the board of directors. Share premium can be writing off part of the expenses, for examples preliminary expenses of the company. When a company plans to buy back the preferences shares which had issued, share premium account could be credit to redeem it. In the end of the accounting periods, the company had to stated the total amount of the share premium account in the statement of financial position because share premium is not part of the divisible profit and could not to be a dividend to pay the cumulative preferential dividends. IMPACT.

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Dividend declared to shareholders who had stated previously is one of the returns for shareholders from the investment in the shares of the organization. For every shareholder are entitle to received dividend from the company due to the performances of the company. Since the dividend declared is due to profit of the company, the dividends can be declared not only on cash term but also can use other ways such as issue the bonus shares. Company paying dividends to shareholders only can use from the profit instead of using the capital of the company or pursuant to section 60. This is prohibits by the Act to ensure the maintenance of the capital is not violated. Dividend will shown on income statement with the current year dividend declared and shown in statement of financial position under current liabilities as a liabilities because the dividends declared normally held end of the year and yet to pay the dividends to the shareholders.