Accounting For Limited Companies Introduction
The accounting rules and conventions for recording the business transactions of limited companies and then preparing their final accounts are much the same as for sole trader. For example, companies will have a cash book, sales day book, purchase day book, journal, sales ledger, purchase ledger and nominal ledger. They will also prepare a profit and loss account annually and a balance sheet at the end of the accounting year.
They are, however, some differences in the accounts of limited companies, of which the following are perhaps the most significant.
- The legislation governing the activities of limited companies is very extensive. Among other things, the company’s acts define certain minimum accounting records which must be maintained by companies. They specify that the annual accounts of the company must be field with the registrar of companies and so available for public inspection. They contain detailed requirements on the minimum information which must be disclosed in a company’s accounts.
- The owners of a company may be very numerous. Their capital is shown differently from that of a sole trader; and similarly the appropriation account of a company is different.