• An annual report is a document produced annually by companies designed to portray a true and fair view of the company’s annual performance, with audited financial statements prepared in accordance with company law and other regulatory requirements, and also containing other non-financial information.• The Companies Act 1985/9 requires companies to publish their annual report and accounts.• It should include:– A balance sheet– A profit and loss account– A cash flow statement– A Directors Report
Stakeholders in the annual report• Shareholders (the owners of the business).• Potential shareholders.• Managers and employees.• Creditors and potential creditors.• Suppliers – especially if the supply goods on credit.• Employees and their trade unions.• The government – for tax purposes.
Functions of the annual report• The stewardship and accountability function– Reporting to shareholders.• The decision making function– To provide information about performance and changes in the financial position of an enterprise that is useful to a wide range of users in making economic decisions.– Providing users, especially shareholders with financial information so that they can make decisions such as buying or selling shares.• The public relations function– The annual report is an opportunity to publicise the corporate image
A true and fair view• Directors are responsible for the preparation of the accounts which must give a true and fair view.• A true and fair view is one where accounts reflect what has happened and do not mislead the readers.• The accounts must be prepared in accordance with relevant accounting standards.
Information to be included • The rules governing the content of the annual report are derived from:• Statute law - the Companies Act • Accounting standards• Stock Exchange rules• Codes of best practice in corporate governance.
Companies Act 1985/9• Directors have stewardship of limited companies.• Directors are required to publish accounts which show a true and fair view of the company’s financial position.• Accounts must be sent to:– All shareholders– All debenture holders– The Registrar of Companies at Companies House.– This must be done within 10 months of the year-end for a private company and within 7 months of the year end in the case of a public company
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Budgets
Nhãn: Accounting
Budgets and budgeting•
Budget is a future plan which sets out a business’s financial targets.• Budgeting refers to the preparation of budgets - the drawing up of financial plans and monitoring the performance of a business in attaining them
Formal definition of a budget•
“A budget is a quantitative statement, for a defined period of time, which may include planned revenues, expenses, assets, liabilities and cash flows. A budget provides a focus for the organisation and aids the co-ordination of activities and facilitates control”. (CIMA)• Budgets are prepared in advance of a defined period of time. They are based on the objectives of the business and are intended to show how policies are to be pursued in order to achieve objectives.
What is a budget?• A budget – is a financial plan.– sets out a businesses financial targets.– is a plan expressed in money. – an agreed plan of action over a given period.– an agreed plan establishing, in numerical or financial terms, the policy to be pursued and the anticipated outcomes of that policy.
Forecasts, plans and budgets• A forecast is a prediction of future events and their quantification for the purpose of planning.• A forecast relates to events in the environment over which the business has either no control or only very limited control.• Hence we have a weather forecast - not a weather plan.• A forecast is not a budget but a prediction of the future.• However, a forecast of future sales is the starting point in the budgeting process.• Planning is the establishment of objectives and the formulation, evaluation and selection of the policies, strategies, tactics and action required to achieve the objectives.• A plan is the end product of planning.• Whereas a forecast is simply a prediction, a plan is what we are going to do about it.• A budget is a plan because it concerns actions to be taken rather than a passive acceptance of future trends.
Time horizons for a budget• Budget time horizon - this refers to the immediate future where on the basis of past business decisions and commitments the consequences are action can be predicted with a reasonable degree of certainty e.g. the next 12 months.• Business planning horizon - the period over which future forecasts can be made with a reasonable degree of confidence e.g. 3-5 years.• Strategic planning horizon - far into the future- it is concerned with the long term aspirations of senior managers e.g. 5+ years. 0 nhận xét
Budget is a future plan which sets out a business’s financial targets.• Budgeting refers to the preparation of budgets - the drawing up of financial plans and monitoring the performance of a business in attaining them
Formal definition of a budget•
“A budget is a quantitative statement, for a defined period of time, which may include planned revenues, expenses, assets, liabilities and cash flows. A budget provides a focus for the organisation and aids the co-ordination of activities and facilitates control”. (CIMA)• Budgets are prepared in advance of a defined period of time. They are based on the objectives of the business and are intended to show how policies are to be pursued in order to achieve objectives.
What is a budget?• A budget – is a financial plan.– sets out a businesses financial targets.– is a plan expressed in money. – an agreed plan of action over a given period.– an agreed plan establishing, in numerical or financial terms, the policy to be pursued and the anticipated outcomes of that policy.
Forecasts, plans and budgets• A forecast is a prediction of future events and their quantification for the purpose of planning.• A forecast relates to events in the environment over which the business has either no control or only very limited control.• Hence we have a weather forecast - not a weather plan.• A forecast is not a budget but a prediction of the future.• However, a forecast of future sales is the starting point in the budgeting process.• Planning is the establishment of objectives and the formulation, evaluation and selection of the policies, strategies, tactics and action required to achieve the objectives.• A plan is the end product of planning.• Whereas a forecast is simply a prediction, a plan is what we are going to do about it.• A budget is a plan because it concerns actions to be taken rather than a passive acceptance of future trends.
Time horizons for a budget• Budget time horizon - this refers to the immediate future where on the basis of past business decisions and commitments the consequences are action can be predicted with a reasonable degree of certainty e.g. the next 12 months.• Business planning horizon - the period over which future forecasts can be made with a reasonable degree of confidence e.g. 3-5 years.• Strategic planning horizon - far into the future- it is concerned with the long term aspirations of senior managers e.g. 5+ years. 0 nhận xét
Incremental Budgeting
Nhãn: Accounting
Incremental budget
• This is a budget prepared using a previous period’s budget or actual performance as a basis with incremental amounts added for the new budget period
• The allocation of resources is based upon allocations from the previous period.
• This approach is not recommended as it fails to take into account changing circumstances
• Moreover it encourages “spending up to the budget” to ensure a reasonable allocation in the next period. It leads to a “spend it or lose” mentality.
Advantages of incremental budgeting
• The budget is stable and change is gradual.
• Managers can operate their departments on a consistent basis.
• The system is relatively simple to operate and easy to understand.
• Conflicts should be avoided if departments can be seen to be treated similarly.
• Co-ordination between budgets is easier to achieve.
• The impact of change can be seen quickly.
Disadvantages of incremental budgeting
• Assumes activities and methods of working will continue in the same way.
• No incentive for developing new ideas.
• No incentives to reduce costs.
• Encourages spending up to the budget so that the budget is maintained next year.
• The budget may become out of date and no longer relate to the level of activity or type of work being carried out.
• The priority for resources may have changed since the budgets were set originally.
• There may be budgetary slack built into the budget, which is never reviewed-managers might have overestimated their requirements in the past in order to obtain a budget which is easier to work to, and which will allow them to achieve favourable results. 0 nhận xét
• This is a budget prepared using a previous period’s budget or actual performance as a basis with incremental amounts added for the new budget period
• The allocation of resources is based upon allocations from the previous period.
• This approach is not recommended as it fails to take into account changing circumstances
• Moreover it encourages “spending up to the budget” to ensure a reasonable allocation in the next period. It leads to a “spend it or lose” mentality.
Advantages of incremental budgeting
• The budget is stable and change is gradual.
• Managers can operate their departments on a consistent basis.
• The system is relatively simple to operate and easy to understand.
• Conflicts should be avoided if departments can be seen to be treated similarly.
• Co-ordination between budgets is easier to achieve.
• The impact of change can be seen quickly.
Disadvantages of incremental budgeting
• Assumes activities and methods of working will continue in the same way.
• No incentive for developing new ideas.
• No incentives to reduce costs.
• Encourages spending up to the budget so that the budget is maintained next year.
• The budget may become out of date and no longer relate to the level of activity or type of work being carried out.
• The priority for resources may have changed since the budgets were set originally.
• There may be budgetary slack built into the budget, which is never reviewed-managers might have overestimated their requirements in the past in order to obtain a budget which is easier to work to, and which will allow them to achieve favourable results. 0 nhận xét
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