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Advanced Financial Accounting


The Development of Financial Accounting in the 20th Century

What is Advanced Financial Accounting?

The research scope and contents

Accounting for Mergers and Acquisitions is our focus.

Characteristics of a company
Legal personality
Limited liability Ownership by share

Perpetual succession
Ability to raise capital Professional management

Types of companies
Size of Ownership
Mode of participation Extend of liability
The public company The proprietary company The share company The guarantee company Limited liability No liability Unlimited liability

Types of companies
Guarantee company are public companies limited by guarantee. They are formed mainly for charitable purposes for community service, rather than with profit-making objectives. They do not issue shares and have no capital as such, for they rely for finance on donations, grants and fundraising activities. Guarantee companies are also used for professional associations, for example, CPA Australia. The members of such companies are not shareholders, nor do they expect distributions from the company. The financial involvement is confined to a contingent arrangement. In the event of the company being liquidated and being unable to pay all its debts, each member undertakes to pay up to an agreed sum to meet the shortfall on liquidation. The member is thus a guarantor, in a fixed amount, of the companys indebtedness, and this guarantee, like the share, defines the maximum liability that the member can incur.

Types of companies
No liability companies are confined to the mining sector of the economy and must be public companies with a share capital. A shareholders commitment to the company does not exceed that amount already paid for the shares. Even if the shares are issued payable in installments, the shareholder is not obliged to make any further payments. If a shareholder does not decide to pay a call, the share are withdrawn and must be sold at public auction. Thus the cost of non-payment is forfeiture of the shares and related to ownership rights. There is no liability in the event of liquidation. The company name of a no liability company must includes the word No Liability or the abbreviation NL.

The main authorities that govern company accounting

Legislation, primarily the Corporations Act;
-The reports that must be produced; the timing of the report; the disclosure and presentation requirements, that is the minimum content of the reports

Accounting standards -Standards made by the accounting professional body that are used as the main
basis of accounting rules on recording data and produce reports.

Stock exchange requirements

-Apply to entities who choose to have its securities traded at the stock exchange

The Annual Report Documents

1. The annual financial report, comprising: i. The financial statements, namely:
Statement of financial performance, i.e. P/L statement Statement of financial position, i.e. Balance sheet A statement of cash flows If required by an accounting standard, consolidated statement of financial performance, Statement of financial position and statement of cash flows Notes to financial statements (including notes related to both the single-entry and the consolidated financial statements. ii. A directors declaration

2. An auditors report; 3. A directors report

Content of the annual financial report

The Corporation Act requires a company to produce an annual financial report but does not provide much detail as to how the report must actually be drawn up, instead, the details are provided by accounting standards.

Financial statements and the notes

Recognized vs disclosed
When recognized is used in the accounting standard, it means that the item in question must be reported on the face of the financial statements, as a separate item and amount or by inclusion in other amounts appearing
there. A failure to specify recognized when imposing a disclosure requirement usually means it can be made either in the notes or on the appropriate statement.

Presentation vs disclosure

The term disclosure means nothing more than that information is included in the financial report, either in one of the financial statements or in the notes. Presentation is concerned with how the information is disclosed

Financial statements and the notes

Notes to the financial statement:
Domicile and legal form; Registered office and principle place of business Description of operations and principal activities The entitys parent entity and ultimate parent entity Number of employees at reporting date and the average for the reporting period Auditors remuneration Executives remuneration Accounting policy for restoration cost relating to non-current assets Economic dependency Etc.

Directors declaration
The directors must declare:
that the financial statements and notes comply with accounting standards the financial statements & notes give a true and fair view whether, in their opinion, there are reasonable ground to believe that the entity will be able to pay its debts and when they become due and payable; whether, in their opinion, the financial statements and notes comply with the law

Annual directors report

The directors report is made in accordance with a resolution of the directors, specified the date the report is made and sign by one or more of the directors. It includes a review of the operation and results, and significant changes in the entitys state of affairs during the year.

Auditors report
Report to members whether or not, in the auditors opinion, the financial report: Is in accordance with the Act Is in accordance with accounting standards Gives a true and fair view
And if not, the auditor must say why