advanced financial accounting - slides lecture 21

8/12/2019 Advanced Financial Accounting - Slides Lecture 21

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Advanced Financial

Accounting

FIN-611Mian Ahmad Farhan

Lecture-21Limited Companies


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Owners Equity

Sole ProprietorshipOpening capital xxx

Add Net profit xxx

Less Drawings xxx

xxx

PartnershipCapital Account xxx

Add/Less Current Account xxx

xxx

CompanyCapital xxx

Reserves xxx

xxx


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Sole proprietorship Owner Sole ProprietorSole proprietorship Owner Sole Proprietor

Partnership Owner Partners

Company Owner Share holders/

Members


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Journal Entries

Capital Introduced

Sole Proprietorship

Cash A/c xxx

Capital A/c xxx

Partnership

Cash A/c xxx

Partners Capital A/c xxx

Company

Cash A/c xxx

Shares Capital A/c xxx


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Issue of Share Capital

Cash resources

Cash A/c xxx

Share capital A/c xxx

Non-cash resources

Fixed Assets A/c xxx

Share capital A/c xxx


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Share Premium

1,700,000

1,000,000 700,000

Bank A/c 1,700,000

Share Capital A/c 1,000,000

Share Premium A/c 700,000


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Ledger Account

Share capital

Share premium

Bank

Balance 1,000,000

Bank 700,000

Share capital 1,000,000

Share premium 700,000


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Reserves

Reserves are the profits of a company that are retained (not distributed) to its share

holders.

Reserves

Capital ReservesRevenue Reserves

Those profit which are not

distributed to share holders as

cash dividend

Those profit which are distributed

to share holders as cash

dividend


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Reserves

Capital Reserves Revenue Reserves

1. Share premium

2. Revaluation reserve

3. Capital redemption

reserve

1. Retained profit / Unappropriated

/ Undistributed profit

2. General reserve

3. Any named reserve

a.Stock replacement

b.Plant replacement


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Profits

Realized profit Unrealized profit

1. Share premium

2. Revaluation surplusProfit after tax

Transferred to

reserve

Paid as dividend

to share holder

Capital redemption

reserve

General

reserve

Plant replacement

reserve

Inventory replacement

reserve


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Transfer of Profit to Reserves

(Journal Entry )

Profit & Loss A/c xxx

Reserve (type) A/c xxx


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----

Balance sheet

As on 31stDec----

AssetsNon-current Assets

Tangible Fixed assets xxx

Intangible Fixed assets xxx

Long term investments xxx

Long term advances xxx

Deposits xxx

Prepayments xxx

Deferred cost xxx

Total Non-current Assets xxx

Current Assets xxx

xxx


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----

Balance sheet

As on 31stDec----

Owners capital

Share capital xxx

Reserves

Capital reserve xxx

Revenue reserve xxx

xxx

Total owners equity xxx

Liabilities

Non current liabilities xxx

Current liabilities xxx

xxx


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----

Income Statement

For the year ended 31st Dec----

Sales xxx

Less Cost of goods sold xxx

Gross profit xxx

Less Operating expensesAdministrative expenses xxx

Selling & distribution xxx

xxx

Profit from operations xxx

Add other incomes xxx

Less Financial expenses xxxIncome before tax xxx

Less Income tax xxx

Profit after tax xxx


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Statements of Changes in Equity

Opening retained profit xxx

Less Dividend payment xxx

Less transfer to reserves xxx

Closing retained profit xxx

advanced financial accounting - slides lecture 21

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