By Arthur Hindmarch
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Extra resources for Accounting: An Introduction
A), or it may, by the implied threat oflegislation in areas where it is thought necessary, persuade the profession to amend their standards. ~ Its indirect influence is shown, for example, in setting regulations for taxing of business profits which may influence how those prOfits are measured for other purposes. The Council of the Stock Exchange, as the body responsible for regulating the public issue of shares and their subsequent trading, is also influential and in fact has its own rules on the reporting of accounting information which go beyond the legal requirements.
No. 2, 'Disclosure of Accounting Policies', issued in 1971 attempted to reduce the extent of this confusion of terminology. The foreword to the statement says: I t is fundamental to the understanding and interpretation of financial accounts that those who use them should be aware of the main assumptions on which they are based. The purpose of this Statement ... is to assist such understanding by promoting improvement in the quality of infonnation disclosed. I t seeks to achieve this by establishing as standard accounting practice the disclosure in financial accounts of clear explanations of the accounting policies followed in so far as these are significant for the purpose of giving a true and fair view.
7 Why are accounting statements produced annually or at more regular intervals? What problems arise because of the necessity for such regular reporting? 8 Prepare a balance sheet from the following information, which is for the Anderson Company as at 30 June 19X3. 8 has been in business for two years only. It started on 1 July 19X 1 with £4000 cash borrowed from the bank. At 30 June 19X2 it had inventory £2000, debtors £3000, machinery £3000, and a bank overdraft of £3000. What is its profit for each of the two years to 30 June 19X3?
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