When preparing the balance sheet for the final accounts of a company, there are certain guidelines to follow. Schedule 2 of the 1967 Companies Act lays down many requirements relating to the published Balance Sheets of Companies. On the claims side:
1. The Authorized Share Capital, the Issued Share Capital, Reserves and Provisions (other than provisions for depreciation which are normally shown by way of deduction from the asset to which they relate) Loans and Current Liabilities should be shown under separate headings.
2. Share premiums must be shown separately under the heading ‘Share Premium Account’.
3. The aggregate amount of bank loans and overdrafts must be shown.
4. The aggregate amount (before deduction of tax) recommended for distribution as dividends.
On the assets side:
1. Fixed assets, current assets and assets that are neither fixed nor current must be separately identified.
2. Fixed assets and current assets should be grouped and the total of each group should be shown.
3. The basis of valuation of fixed assets must be shown. These will generally be shown ‘at cost’ less the aggregate amount of depreciation written off to date.
4. Investments should be shown separately. Trade, quoted and unquoted investments should be separately identified. The market value of quoted investments must be shown if different from the Balance Sheet valuation.
5. The following should be shown under separate headings:
(a) Goodwill and Trade Marks in so far as the amount is ascertainable and has not been written off.
(b) Preliminary expenses not written off.
(c) Expenses, commission and discount on any issue of shares or debentures in so far as it has not been written off.
Auditor’s Report
A company must appoint an auditor or auditors at its annual general meeting to hold office until the next annual general meeting.
The auditors have right of access at all times to the company’s books, accounts and vouchers and shall be entitled to require from the officers of the company such information and explanations as they think necessary for the performance of their duties as auditors. They must report to the members on the accounts examined by them.
This report is usually confined to statements as to whether, in the opinion of the auditors:
(a) The Balance Sheet and Profit and Loss Account have been properly prepared in accordance with the provisions of the Companies Acts;
(b) The Balance Sheet and Profit and Loss Account give a true and fair view respectively of the state of affairs and the profit and loss of the company.
The Companies Acts provide that every Balance Sheet of a company must be signed on behalf of the board by two directors or by the sale director, and that the auditor’s report must be attached and read before the company in general meeting.
Tags: balance sheet, bank loans, company, current liabilities, final accounts, fixed accounts, share capital, share premiums