Page 334 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 13: Final Accounts for Companies

 A realistic understanding of the operations of the business would require two other Notes
statements - Profit and Loss Account and Funds Flow Statement.

13.7 Keywords

Asset: Anything, tangible or intangible, of monetary value to a business entity.
Contingent Liability: A liability which has not been recognised as such by the entity. It becomes
a liability only on the happening of a certain future event. An example could be the liability
which may arise out of a pending law suit.
Current Assets: All of the assets held by a firm with the objective of conversion to cash within the
operating cycle or within one year whichever is longer. Current Assets include items such as
cash, receivables, inventory and prepayments.
Current Liabilities: All those claims against the assets of the firm to be met out of cash or other
current assets within one year or within the operating cycle, whichever is longer. Usually
include items such as accounts payable, tax or other claims payable, and accrued expenses.

Fixed Asset: Tangible long-lived asset. Usually having a life of more than one year. Includes
items such as land, building, plant, machinery, motor vehicles, furniture and fixtures.
Intangible Assets: Any long-term assets useful to the business and having no physical
characteristics. Include items such as goodwill, patents, franchises, formation expenses and
copyrights.
Liability: Any amount owed by one person (the debtor) to another (the creditor). In a balance
sheet all those claims against the assets of the entity, other than those of the owners.
Owner’s Equity: It is the owner’s claim against the assets of a business entity. It could be expressed
as total assets of an entity less claims of outsiders or liabilities, includes both contributed capital
and retained earnings.

13.8 Review Questions

1. What are the legal requirements regarding the transfer of profit to the reserves?
2. What is the difference between final dividend and interim dividend?
3. Mention the various sources of dividend.
4. Explain the different methods of capitalization of profit.
5. What are the different types of balance sheets?

6. What are the statutory provisions relating to transfer of profit to reserve?

Answers: Self Assessment

1. Annual General Meeting 2. 9 months
3. 211 4. 10%
5. Share Premium A/c and fully paid equity shares,

6. c 7. c
8. d 9. a
10. b 11. True

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