Preparing final accounts involves compiling various financial statements to present a comprehensive overview of a company’s financial performance and position. In addition to the income statement (Profit and Loss Account), balance sheet (Statement of Financial Position), and cash flow statement, final accounts may also include details regarding managerial remuneration and disposal of profits. Here’s how you might structure the final accounts to incorporate these elements:
- Income Statement (Profit and Loss Account):
- Start with the revenues earned during the accounting period, detailing sales, service income, interest income, etc.
- Deduct the cost of goods sold (COGS) to calculate gross profit.
- Subtract operating expenses, such as salaries, rent, utilities, depreciation, and other administrative expenses.
- Account for any other income or expenses, such as gains or losses from the sale of assets.
- Calculate the net profit or loss for the period.
- Balance Sheet (Statement of Financial Position):
- List the company’s assets, including current assets (cash, accounts receivable, inventory) and non-current assets (property, plant, equipment).
- Detail the company’s liabilities, including current liabilities (accounts payable, short-term loans) and non-current liabilities (long-term loans, deferred tax liabilities).
- Present shareholders’ equity, including share capital and retained earnings.
- Managerial Remuneration:
- Provide details of the remuneration paid to key managerial personnel, such as directors and executives.
- Include information on salaries, bonuses, benefits, and any other forms of compensation.
- Disclose any provisions or agreements related to managerial remuneration, including limits set by the company’s articles of association or regulatory requirements.
- Disposal of Profits:
- Describe how the company intends to allocate its profits for the period.
- If dividends are declared, specify the amount per share and the total payout to shareholders.
- Detail any retained earnings, indicating whether they will be reinvested in the business or held as reserves.
- Provide information on any other uses of profits, such as share buybacks, debt repayment, or investments.
- Notes to the Accounts:
- Include explanatory notes that provide additional context and detail for the figures presented in the financial statements.
- Disclose any significant accounting policies, assumptions, or estimates used in preparing the accounts.
- Provide information on any contingent liabilities or commitments that could impact the company’s financial position.
By incorporating the computation of managerial remuneration and disposal of profits into the final accounts, stakeholders gain a more complete understanding of the company’s financial performance, governance practices, and strategic decisions