Principles of Accounts-Scheme of work-7-04 - Ourpgs.com

UNIT 7Limited CompaniesRecommended Prior Knowledge It is important that students are able to prepare final accounts and balance sheets for sole traders, together withappropriate adjustments before beginning this Unit. This Unit can be studied in parallel with Unit 6 in respect of Partnerships.Context The Unit covers the implications of the business being a company on the final accounts of a business.Outline The Unit serves to highlight the similarities in final accounts between different types of business as well as the differences.SyllabusRef.3.1 and3.2Learning Outcomes Suggested Teaching Activities Online Resources Other resourcesCandidates should be able to:• fulfill the learning outcomesdetailed in Unit 5 which are alsorelevant to limited companiesAs in the case of partnerships, there aremany similarities between the accounts ofsole traders and companies. Recapitulateon the advantages and disadvantages ofsole trader and partnership and thenintroduce limited companies.http://www.bized.ac.uk/dataserv/extel/notes/cass-ex.htmhttp://www.bized.ac.uk/dataserv/extel/notes/clias-ex.htmhttp://www.bized.ac.uk/dataserv/extel/notes/bs.htmBKA 37BM 49, 50, 51, 52, 53, 54, 55Major differences in the balance sheet of acompany are:• The profit and loss account balance.All profits/(losses) are transferred tothe owner(s) in sole trader andpartnerships• Proposed dividendshttp://www.bized.ac.uk/dataserv/extel/notes/dpay-ex.htmCapital employed is an important measurein a company and how it is measuredshould be explained in advance of futurestudies involving ratios and analysis.www.ourpgs.com1

SyllabusRef.Learning Outcomes Suggested Teaching Activities Online Resources Other resources4.5 Candidates should be able to:• prepare a simple limitedcompany appropriation account• explain the capital structure of alimited company and how itappears in the Balance Sheet• recognise the distinctionsbetween authorised, called-up,issued and paid-up share capitaland between share capital –ordinary and preference - andloan capital e.g. debenturesThere are parallels with partnerships in thecase of the company appropriationaccount. In the case of a company themain transactions seen in the appropriationaccount are proposed and paid dividendsand transfers to and from reserves.The structure of capital in a company canbe complex including not only shares butalso capital and revenue reserves. Illustrateand explain the use of the common typesof reserve and the common types ofcapital. Multiple choice questions are usefulto help students think through thevariations.Time should be spent outlining the featuresand differences between an ordinary share,a preference share and a debenture.http://www.askltd.com/askjava/ltdcomps.htmhttp://teachers.cie.org.uk/teacher_support/pdf/7110_w03_qp_1.pdfhttp://teachers.cie.org.uk/teacher_support/pdf/7110_s03_qp_2.pdfhttp://www.bized.ac.uk/dataserv/extel/notes/seq-ex.htmCIE Nov 2003 Paper 1 Q35CIE Jun 2003 Paper 2 Q3Candidates will not be required toprepare a company's Profit andLoss Account or a completeBalance Sheet, to make entries torecord the issue of capital, or toknow the accounting requirementsof the Companies Acts.Debentures are often regarded as part of‘loan capital’ although loans rank as acreditor and not capital at all. It is importantto emphasise this important distinction andits implications to students.It is important to clarify for students theextent of this syllabus so that they spendtheir course and homework time on mattersof direct relevance.http://www.bized.ac.uk/dataserv/extel/notes/ltl-th.htmhttp://www.bized.ac.uk/dataserv/extel/notes/ltl-ex.htmwww.ourpgs.com2