Unit 11 Drafting Financial Statements (Accounting Practice, Industry and Commerce)
Unit Commentary
This unit is about drafting and interpreting financial statements of limited companies. The first element in this unit is about drafting limited company year-end financial statements from a trial balance. You are responsible for ensuring that the financial statements comply with any relevant domestic legislation and either the relevant UK standards (Statements of Standard Accounting Practice, Financial Reporting Standards and other relevant pronouncements) or the International Accounting Standards. You also need to show that you ensure that confidentiality procedures are followed. The second element requires you to interpret the financial statements of companies and the relationships between the elements using ratio analysis.
Elements contained within this unit are:
Element 11.1 Draft limited company financial statements
Element 11.2 Interpret limited company financial statements
Knowledge and Understanding
To perform this unit effectively you will need to know and understand:
The Business Environment:
The elements and purposes of financial statements of limited companies as set out in the conceptual framework for financial reporting (Element 11.2)
The general legal framework of limited companies and the obligations of Directors in respect of the financial statements (Element 11.1)
The statutory form of accounting statements and disclosure requirements (Element 11.1)
The UK regulatory framework for financial reporting and the main requirements of relevant Financial Reporting Standards
or
The relevant requirements of the International Accounting Standards (Element 11.1)
The forms of equity and loan capital (Element 11.1)
The presentation of Corporation Tax in financial statements (Element 11.1)
Accounting Techniques:
Preparing financial statements in proper form (Element 11.1)
Analysing and interpreting the information contained in financial statements (Element 11.2)
Computing and interpreting accounting ratios (Element 11.2)
Accounting Principles and Theory:
Generally accepted accounting principles and concepts (Elements 11.1)
The general principles of consolidation (Element 11.1)
The Organisation:
How the accounting systems of an organisation are affected by its roles, organisational structure, its administrative systems and procedures and the nature of its business transactions (Elements 11.1 & 11.2)
Element 11.1 Draft limited company financial statements
Performance Criteria
In order to perform this element successfully you need to:
Draft limited company financial statements from the appropriate information
Correctly identify and implement subsequent adjustments and ensure that discrepancies, unusual features or queries are identified and either resolved or referred to the appropriate person
Ensure that limited company financial statements comply with relevant accounting standards and domestic legislation and with the organisation’s policies, regulations and procedures
Prepare and interpret a limited company cash flow statement
Ensure that confidentiality procedures are followed at all times
Range Statement
Performance in this element relates to the following contexts:
Limited company financial statements:
Income statement
Balance sheet
Cash flow statement (not consolidated)
Statement of total recognised gains and losses
The supplementary notes required by statute
Unitary
Consolidated
Domestic legislation:
Companies Act
Relevant accounting standards:
Relevant Statements of Standard Accounting Practice, Financial Reporting Standards and other relevant pronouncements
or
International Accounting Standards
Unit 11 Drafting Financial Statements (Accounting Practice, Industry and Commerce)
Element 11.2 Interpret limited company financial statements
Performance Criteria
In order to perform this element successfully you need to:
Identify the general purpose of financial statements used in limited companies
Identify the elements of financial statements used in limited companies
Identify the relationships between the elements within financial statements of limited companies
Interpret the relationship between elements of limited company financial statements using ratio analysis
Identify unusual features or significant issues within financial statements of limited companies
Draw valid conclusions from the information contained within financial statements of limited companies
Present issues, interpretations and conclusions clearly to the appropriate people
Range Statement
Performance in this element relates to the following contexts:
Financial statements:
Balance sheet
Income statement
Elements:
Assets
Liabilities
Ownership interest
Gains
Losses
Contributions from owners
Distributions to owners
Relationship between elements:
Profitability
Liquidity
Efficient use of resources
Financial position
