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Unit 6 - Financial Accounting P1
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Unit 6 - Financial Accounting P1 P1 describe how legislation and accounting concepts affect an organisation’s accounting policies
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Abdulalah Al-JoboreUnit 6: financial accounting
P1
Finanical
accounting
By
Abdulalah Al-Jobore
1
, Abdulalah Al-Jobore
Unit 6: financial accounting
P1
P1 describe how legislation and accounting concepts affect an organisation’s accounting
policies
Companies act (1985, 1989 and 2006)
The companies act is one of the most important legislations of the UK company law as it
governs limited companies throughout the UK. Many of different other pieces of legislation
are work under the companies act, and additionally it is covers all the responsibilities and
duties of both directors and secretaries. The companies that run under this act must need to
produce an annually reports which outline and give information about their business
activities. Therefore, this will help the shareholders to fully understand the information in
order to invest or backing the business. Furthermore the shareholders must be aware of any
material changes of their share capital within the business.
Furthermore, the companies act in the UK has been facing a number of changes since the
Companies Act 1985, as the government has improved some sections and laws which was
notably on the addition of Companies Act of 1989 and 2006.
Under this act, the companies must produce financial statements in a given period which
help the stakeholders such as the shareholder and the government to understand how the
business is running. The financial statements must include important details showing the
cash inflow and outflow, the assets and liabilities of the business. It is important to make
sure the financial statements are produced in a standard format to make sure that is can be
read easily and clearly.
The companies act applies only to the companies which are incorporated under it or the
under the earlier Companies act. Therefore, the sole trader, partnership, and limited liability
partnerships are not governed by the companies act. For example, the Companies Act is not
applies on Mr Jones’ Business as it a Sole trader, therefore Mr Jones’ Business will be not
affected by this act. However, it is very important for Mr Jones if he consider to becoming a
limited company as the he will need to consider this act and understand it fully before
making a final decision.
Partnership Act (1890)
A partnership is when at least two or more individuals joined to establish a new business.
Usually a contract of partnership will draw up. In the partnership, each partner will have to
contribute toward the capital income of the business. Therefore, this mean the amount of
the potential capital income will increase. Partners will share responsibility between them,
which will allow them for specialisation, so each partners, can complement the other’s
strength. Partners will be able to share the profits and make decision between and
themselves. Most of the partnership, loans have to be secured by the partners’ own assets
so they can be pay their loan equally. The partnership will be unincorporated and they will
be governed as a partnership even if they do not intentionally want to be.
2
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