LIMITED COMPANIES ACCOUNTS 2

Limited Liabilities Companies – Profit & Loss Account

 

This is similar to a sole trader or partnership Profit & Loss Account.

 

However, there are several additional items of which require further explanations here.

 

These items include Auditor’s remuneration, Director’s remuneration and  Debenture Interest.

 

 

 

Auditor’s Remuneration

 

Is the fee paid to the auditor.

 

It will need to be accrued as it is only known after the accounts have been audited.

 

 

Journal Entry:

 

Dr           Auditor’s Fee / Remuneration

Cr                            Accruals

Directors’ Remuneration

 

Comprises of directors’ fees and directors’ salaries.

 

Directors’ fees are payable to directors who are in the advisory capacity.

 

Directors’ salaries are paid to directors who are actively involved in the running of the company’s activities.

 

If require to accrue additional fees and salaries, the journal entry will be as follows:

 

 

Journal Entry:

 

Dr           Directors’ Remuneration

Cr                            Accruals

 

 

 

 

 

Interest Expense

 

This is an expense item which could comprise of loan interest and/or debenture interest.

 

Adjustment may be needed to accrue some interest to ensure a full years charge to Profit

& Loss Account.

 

 

Journal Entry:

Dr           Loan / Debenture Interest

Cr                            Accruals

 

 

 

 

 

Dividends

 

This dividends can comprise of dividends payable to ordinary shareholders and preference shareholders.

 

For both cases, the dividends will need to be reflected in the Appropriation Account.

 

 

 

 

 

Ordinary Shareholders

 

Interim dividends

 

This dividends are paid within the accounting year.

 

 

Journal Entries:

 

Dr           Interim Ordinary Dividend

Cr                            Bank

Final Dividends:

 

Only payable once the company has knowledge of how much profit is available for distribution.

 

 

 

Journal Entries;

 

Dr           Proposed Final Dividend

Cr                            Accruals

 

 

 

 

 

 

Preference Dividends

 

This dividends are paid during the accounting year.

 

 

Journal Entries:

 

Dr           Preference Dividend

Cr                            Bank

Unpaid Preference Dividends

 

Journal Entries:

 

Dr           Preference Dividend

Cr                            Accruals

 

 

 

 

 

 

 

 

 

 

 

IMPORTANT REMINDER

 

THIS IS TO PROVIDE STUDENTS A COURTESY REMINDER THAT THIS BLOG IS CATERED

TO HELP ACCOUNTANCY STUDENTS AT BASIC LEVEL TO GAIN A QUICK SUMMARY OF

MAJORLY ALL THE BASIC COMPONENTS OF THE BOOK-KEEPING AND ACCOUNTING STUDIES.

 

IT IS NOT MEANT TO PROVIDE A COMPLETE CONTENT OF THE SUBJECT MATTER.

 

THEREFORE, STUDENTS ARE ADVISED TO TAKE THIS INFORMATION RESOURCE AS A SUPPLEMENTARY READING ONLY.

THIS READING MATERIAL IS ONLY A SUMMARY OF WHAT IS ESSENTIAL IN GETTING  A GOOD

UNDERSTANDING BUT NOT AN EXHAUSTIVE ONE OF THE RELATED TOPIC.

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