Week 1 - Nature & Regulation of Companies & Company Operations Legal nature of company Separate legal identity, distinct from owners Companies act through ‘agents’. eg. shareholders elect board of directors to act on their behalf Public Company (Ltd.) Limited liability of owners • Raises funds from public Types of companies Private Company (Pty. Ltd.) • • • • • • • • •
Regulation of companies Corporations Law: Companies must keep proper accounting records; prepare yearly & half-yearly FS; ensure FS comply with accting standards. Accounting Standards: Australian Accounting Standards Board (AASB) is responsible for issuing accounting standards which have backing of the Corporations Law. Australian Stock Exchange – listing rules require companies disclose certain info.s which are necessary to fully inform stock market. Australian Securities & Investment Commission (ASIC): administers Corporations Law including compliance with Accounting Standards International Accting Standards Board (IASB): attempts to converge/harmonise acting standards throughout the world. Reasons for regulating financial reporting Reasons for preparing FS: Provides info. that is useful for making economic decisions to resource providers (eg. shareholders, lenders, employees), recipients of G&S (eg. customers, taxpayers), oversight groups (eg. regulatory agencies, media, unions). Characteristics of useful accting info.: relevance (predictive, feedback, timely), faithful representation (verifiable, Gloria Ltd reliable, free from bias), comparability & consistency, materiality. Relationship between FSs Revaluation of video library by $1500: DR Video Library Cr Revaluation surplus Revaluation of library is shown in other comprehensive income Gloria Ltd Statement of income and other comprehensive income For period ended 31 January 2012 Income Rental revenue 10600 Expenses (classified by function) Selling expenses -advertising 200 Administrative expenses -telephone 195 -electricity 185...
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