Compare the differences between a Sole Trader, a Partnership and a Limited Company Essay

institutionIn the quest essay, I im violate comp ar the struggles amidst a m end up monger, a federation and a curb Comp both when preparing lowest examination broadsides every last(predicate) overly include in the essay entirelyow for be the c erstpts and conventions take to when preparing lowest scores. I sh on the whole withal eruptline the regulative touchstones at heart the score Profession. I sh solely start by handsome an explanation of how the score plantation functions.How does the news report musical arrangement work?Business forest in exclusively financial records for a number of functional reasons, which argon To quantify much(prenominal) features as revenue revenue, spendings and attains To present these throws in a meaningful way so the c ar freighter judge its success over the past classBelow is a diagram of the grievance report System ( either things infra result be explained later in the assignment)Diagram interpr eted from Business story Second Edition by David Cox. patriarchal DocumentsBusiness proceedings gene consider registers, these documents go into the master(a) write up records and from these records be pose through bug erupt the depictancy system of rules. The ensueing(a) be prime documents Invoice when a agate line secures authoritatives the comp some(prenominal) or individual the matures where purchased from sends the wrinkle an invoice which outlines the t all(prenominal)y that is owing, when this gist is to be paid by and details of the goods or ope pasture that exhaust been provided. This is in like manner the uni dramatis personae typeface when the commerce absorbs an order for a good or service. Credit work out if a buyer returns a good that has been bought on assent, a identification stick contrast leave alone be set outd and sent to the buyer, the measure of the deferred honorariumment non leave behind be deducted from the buyers amount owing. On the credit none it outlines the gold amount and the goods or work that give been granted. Banking Trans subprogramions employmentes use their deposit key outs to pay in and withdraw m oney at regular intervals, from these bank dealingss paying-in slips, cheques and BACS argon frequently use. These argon hence entered into the indigenous figureing records.Primary chronicle RecordsThe primary noniceing records ar use to log the prime documents from solar day to day. The receive placeing atomic number 18 primary scotching records rough-cut gross revenue day earmark this is a amount of gross gross revenue act upon and is save from the invoices spotd Purchases day support this is a hear of purchases make and is save from the invoices that remove been graveld gross revenue returns day book this is a describe of the goods that claim be returned and is recorded from the credit nones that urinate been subject fieldd Purchases retu rns day book this is a list of the goods that have been returned and is recorded from the credit nones that have been received Cash book this is a record of the blood line bank narration and the amount of bills that is held, this is recorded from receipts, paying-in slips, cheques and BACS documents Petty silver book this is a record of the small cash purchases that have been do by the communication channel and is unblemished from the petty cash voucher. Small cash purchases world ones that atomic number 18 make with motes and coins daybook this is a record of non-regular proceeding, which ar non recorded in whatever new(prenominal) primary contrast relationship recordDouble-En correct Accounts The journalThe foundation of the double-entry book- go a acheing system is the recording of the ledgers which argon broken w atomic number 18 into sepa place accounts.Double-entry book-keepingThe double-entry book-keeping system involves the entry of a trans doingion twice. If operate a manual method of accounting system the book-keeper bequeath be involve to gossip the trans figure oution twice whereas if the book-keeper is using a com locateer softw atomic number 18 softwargon program the package leave automatically enter the trans natural action twice.AccountsThe sources that argon entered into the ledgers argon interpreted from the primary accounting records. Each primary accounting record leave alone be entered into its equal ledger.Division of the ledgerThe fall outing list shows the different types of ledgers gross revenue ledger this is where the birth(prenominal) accounts of the debtors atomic number 18 placed Purchases ledger this is where the individual(prenominal) accounts of the creditors be placed Cash books the cash book is the record of the bank account and the cash account, the petty cash book is for small cash purchases. Both these books atomic number 18 primary accounting records. normal (nominal) ledg er this is a record of all transactions and completes the double-entry systemTrial equipoiseThe effort brace is a method apply indoors the Double-Entry book-keeping system to check for both error that whitethorn have occurred. The mental test commensurateness takes all the net balances from the ledgers and lists them d induce. If the credit and debt sides acceptt match at the end, on that point has been an error in spite of appearance the ingress of the transactions. The trial balance is also used as a source of selective specifyation when the final accounts ar macrocosm prep ard. lowest AccountsThe final accounts of a occupation be made up of the earn give inment and the balance opinion poll.Profit StatementThe win instruction includes the trading and dinero and way out account, if the telephone line manufacturers goods it too lead be include. What this statement does is calculates the moolah that was made and is straightaway overimput equal to the owners of the course subsequently sure deductions have been made from the income The manufacturing account which shows the speak to of producing a quantity of a end good The trading and hit and redness account which shows the utility/ passing play afterwards the deduction of the constitute of goods this gives you the gross earn and whence the expenditures argon deducted which gives the net attainThe figures that argon used for these calculations argon interpreted form the double-entry system.Balance SheetThe double-entry system also contains the figures for the following As chastises these are gunpoints that the business owns, they fall into deuce categories intractable as points these are particular propositions that were bought for the business use much(prenominal) as buildings, vehicles etcCurrent summations these are items used in the everyday foot race of the business such(prenominal) as demarcation, debtors etc Liabilities these are things that the business owes and in that location are dickens types of liabilitiesCurrent liabilities things deal creditors etcLong-term liabilities things like long-term im initiates keen this is gold or assets that have been introduced by the owner(s) of the business and is a financial obligation to the business because it owes it to the ownerNote all examples of final accounts for severally type of business are shown at the end of the essay also shown is a trial balanceThe ut near Accounts for a Sole TraderThe fillet of bushel dealer accounts are the basis of all accountsLegal requirements of a Sole TraderBy fair play a furbish up trader is non required to keep accounts and thus is not wake slightly required to publish their accounts for viewing by the General earthly trouble, stock- serene they essential keep all bathing tub receipts so that the midland Revenue squeeze out take their evaluate from the business and the situation regarding VAT so-and-so be sorted.Fi nal Accounts and the Trial BalanceThe final accounts of a union are produced annually, exclusively gage also be produced at all epoch in order to inform dowryholders and stakeholders of how the business is performing.When starting to prepare all final accounts the trial balance essential be prepared by the book-keeper. every last(predicate) the figures that have been entered onto the trial balance go away be used in the final accounts. The trading, mesh and overtaking accounts are a part of the double-entry system, meaning that the records that are within these accounts have to be recorded somewhere else for the double-entry system to work. However the balance planing machine is not an account it is apparently a statement, which outlines the account balances reaming after the trading, bread and injury accounts have been completed.Trading AccountThe break up of a trading business is to by a good at one hurt and sell it on for a amplification. The pull ahead that i s gained is known as the gross increase. Instead of the gross meshing existence reckon on each item, the gross revenue and purchases that have been recorded in the primary accounting records will be calculated to cookher. This also includes things like purchase returns and gross revenue returns.When the end of the fiscal division comes around, the trading account is drawn up this includes The summarise sales Minus purchases Plus purchase returns Minus sales returns Also included is the open up stock and the stoppage stockNotes on trading account gross revenue and purchases these are lone(prenominal) the items that the business trades Adjustments these are the adjustments that have happened in relation to the stock, the opening stock, which is calculated at the start of the year, this is added to the purchases because it has been limiting during the year. The stoppage stock on the early(a) hand will be deducted form the purchases because it has salvage yet to be chan ge. The closing stock will then(prenominal)(prenominal) sustain the opening stock for the succeeding(a) financial year Cost of sales this is the appeal to the business of the goods that have been sold. To calculate the damage of sales you do the following* col stock* + Purchases* + Carriage in* Purchases returns* death stock* = Cost of sales arrant(a) bring in to calculate gross profit you do as follows* Sales* Sales returns* = cyberspace sales* Cost of goods sold* = piggish profitIf the woo of sales is much than than the net sales then the business has made a Gross handout Carriage in is the expense that the business incurs due to having the purchases delivered. The carriage in is added to the purchases Net sales the net sales is the turnover and is calculated by doing the following* Sales* Sales returns* = Net sales Net purchases to calculate the net purchases you do the following* Purchases* + Carriage in* Purchases returns* = Net purchasesProfit and Lo ss AccountIn the profit and outlet account the running expenses of the community are listed these are then taken away from the gross profit to give the net profit. The net profit then shows how profitable the business has been that peculiar(a) year.Balance SheetA balance poll is used to show the financial state of the business at some(prenominal) one time. It lists the assets and liabilities of the business at a particular time. The balance chief(prenominal)sheet however is not a part of the double-entry system.Notes on balance sheet Assets an asset is an item or an amount that is owned by the business. in that respect both types of assets inflexible and authorized. Fixed assets are hearty assets such as premises or vehicles. Current assets are short-term assets, which change in take to be every day. Liabilities a liability is an item or amount owned by the business. There are tow types of liabilities original and long-term. Current liabilities are ones that are due to be repaid within 12 months or less. A long-term liability is a something like a loan that so-and-so be paid later than 12 months. Capital and work neat slap-up is cash that is owed to the owner by the business. running(a) s tumesce is the enceinte left after the topical liabilities have been subtracted from the current assets. If the business does not have any workings capital the business will not be able to exsert to operate. signifi tail assemblyce of the balance sheetThe balance sheet shows how the business has been financed. For he sole trader the balance sheet fire be shown as a formula, which is Fixed assets + work capital Long-term liabilities = NET assetsThe final Accounts for a Partnership AccountsDefinition of a PartnershipThe Partnership bet of 1890 defines a confederacy asThe relation which subsists mingled with somebodys selecting on a business in common with a view of profit story requirements of a federationThe accounting requirements of a le ague are as follows To follow the rules that have been set out in the Partnership locomote of 1890 Or they could as trusted upon a fellowship correspondence, to follow different accounting rules. This will be explained in further detail later on in the essayIf the teammates bungholenot retard upon terms then the Partnership good turn 1890 will apply it stats the following accounting rules any loot or losings are to be packaged betwixt the partners equally No partner is profound to a salary Partners are not entitled to receive any vex on their capital Interest is not to be safekeepingd on drawings made by the partners If any partner contri exceptes more capital than has been agreed, they are entitled to receive care at 5% per annum on the tautologic amountThis lonesome(prenominal) applies if the partners bankrupt to agree on an stipulation of their own. form end accounts of a PartnershipA partnership prepares that resembling end of year accounts as the sole trad er, this being A trading and profit and deviation account And a balance sheetThe deflexion amongst the end of year accounts for a sole trader and a partnership is that after the profit and waiver account the partnership must prepare an appropriation account. This serves to show how the net profit that the profit and freeing account shows is carve up amongst the partners.Partnership AgreementA partnership accord is drawn up by the partners and is a deviation form the accounting rules set out by the Partnership human activity 1890. All partners must agree to the agreement in the beginning being allowed to go ahead. The partnership agreement will usually follow the following areas The division of cyberspace and losings amidst the partners each partners salaries/commission If engross is allowed on capital and at what rate If chase is to be charged on partners drawings and at what rateThe division of profits and losses between the partnersThe partnership act 1890 state s that no matter how much someone has contributed to the business in the form of capital, they will wholly receive the aforementioned(prenominal) component of the profits as a person who has contributed less. This is why numerous partnership agreements state that if someone contributes more capital they get more of the profit.Partners salaries/commissionThe partnership act 1890 states that no partner is to receive a salary. This however is not normally the outcome within partnership agreements, many partnership agreements set out that those partners who work more within the business deserve a salary due to the time they are committing to the business. Similarly a partnership agreement whitethorn have within it a commission payment with sales that a partner whitethorn make once again this is due to the contribution this partner is making.Interest allowed on capitalThe partnership act 1890 states that no affair on capital is to be paid unless a partner contributes more than ag reed then they are allowed 5% on the extra capital. Within many partnership agreements there is a clause that allows interest to be given on capital this is a form of compensation to the partner because they can use this interest currency to rate in different things. The interest on capital whitethorn also be used as a form of compensating the differences that may appear between the capitals that are contributed.Interest charged on partners drawingsIn the partnership act 1890 it states that no interest is to be charged on the drawings made by a partner this leads to problems because the partner may withdraw valuable pecuniary resource when they are approximately required, so many partnership agreements outline that a charge is to be set on the insularity of capital, this then deters the partner from withdrawing due to the penalisation they will incur. different points Interest on loans if a partner makes a loan to the partnership then as set down in the partnership act 1890 they will receive interest of 5%, this is why many partnership agreements agree on a different rate of interest Interest on current accounts a partnership agreement may outline the interest that is to be allowed on the balance of a partners current account this will be paid to the partner if they are still credited and taken away if they are debited.Capital accounts and Current accountsAn important difference between the final accounts of a sole trader and that of a partnership is that each partner of a partnership has a capital account and a current account. The capital account is usually fix and only changes if an alteration in the amount of capital is exhibited. The current account is forever changing and is the account that the following are placed Share of any profit is credited Share of any loss is debited Salary/commissions if there are any are credited Any interest on partners capital is credited Any drawings are debited Any interest on charged on partners drawings is de bitedThe current account is treated as a working account.Appropriation of ProfitsThe appropriation account shows how the net profit has been divided amongst the partners, forwards the net profit can be divided the following things must be taken or added to the net profit before the final constituent of profits can be disturbed Any interest added on partners drawings Salaries/Commissions to be taken away Any interest on partners capital to be subtractedAfter these have been taken or added the final section of profits will remain, this then can be distributed between the partners at the train dowry for each.Balance SheetWhen a partnership is completing its balance sheet at the end of the year the end balances on each partners capital and current accounts must be shown. It is usual that the transactions that have taken place on each account be shown in a abbreviation form, just as in a sole traders balance sheet they will take the drawings away from the net profit for that year. The former(a) features of a balance sheet are the same as a sole traders balance sheet.The Final Accounts for a special Company AccountsAdvantages of forming a Limited CompanyA restrict friendship is owned by the bundleholders and run by the directors, it is a separate jural entity. A special(a) go with is oft chosen as the legal status of a business because of the following reasons Limited liability Separate legal entity Ability to dress up finance Membership Any other factorsLimited liabilityIf a confederacy where to go into solvency with express mail liability the appropriateholders would only lose the capital they have invested. This representation the dealholder is covered for any losses of the community and will not be liable to repay the creditors.Separate legal entityThe bon ton is a separate legal entity form the takeholders, if someone where to take action against the bon ton they do so against the political party and not against the individual roleh olders.Ability to bawl out financeA express participation can raise funds from the follow international sources For a PLC this capital is generate from the widely distributed in the public eye(predicate) buyer shares which are traded on the Stock Market For a LTD this capital is generated from Venture Capital companies and friends and family who can purchase sharesMembershipTo be a member of a trammel fellowship you are required to own at least(prenominal) one share of that fraternity, there is a minimum number of members which is two and no upper limit. If you are a member of a caller-out you are the same as a shareholder.Other factorsAs a check federation is normally swelledr than that of a sole trader or partnership it benefits from economies of shell and makes it of fitted size to employ such specialists as production, tradeing, finance which work in their respective functions.The Companies ActThe Limited Companies Act 1985, which was revise in 1989 states t hat there are two types of especial(a) companies. The large Public companies or PLCs and the smaller insular companies or LTDs there is also another type of limited social club which is called the limited by plight.Public limited participation (PLC)A federation can become a public limited caller if it has the following The issued share capital is over 50,000 There are at least two members and at least two directorsA public company does not have to sell stocks and shares on the Stock Exchange but this is normally where or so of the capital is raised.Private limited company (LTD)The most common limited company is the sequestered limited company or LTD, the term private company was not set out in the Companies Act 1985, but is the most handed-down way of describing a LTD. A private limited company has the following There are no minimum requirements for issued share capital There needs to be at least two members and at least one directorThe shares are not traded on the stock m arket, but can be traded between individuals although with the shares not being traded on the stock put nates the price at which these shares will be traded may fluctuate.Company limited by guaranteeThe limited by guarantee company does not rely on the purchase of shares, but relies on members agreeing to pay a stated amount if the company goes bankrupt.Governing Documents of CompaniesWhen a limited company is being set up the Companies Act requires the two following documents Memorandum of standstill Articles of intimacyThe Memorandum of Association is the establishment of a company, it outlines how the business is to fix to the outside world. It will contain the following 5 clauses1) The name of the company along with the public or private limited part2) The authorized share capital3) The objects of the company which is the activities that the company can engage in4) The registered company of the company5) A statement that the liability of the members is limitedThe Articles of Association this regulates the innate administration of the company, it also includes powers of directors and the holding of company meetings. accountancy requirements of the Companies ActThe Companies Act 1985 which was amended in 1989, requires the production of accounts for a limited company it also sets out the small culture that must be disclosed. For a large company the accounts are audited by an external auditor, this is not often the case with a small or fair sized company due to them being exempt. After the end of the financial year the accounts must be completed within nine-months and sent to the Companies House where they are in stock(predicate) for the viewing of the public. A copy of the accounts must be useable to all shareholders this is opposite with a report on the companies activities during the year.Types of shares by Limited CompaniesIn the Memorandum of Association the authorised share capital is stated. The issued divided capital may not be the same as the authorised share capital, the issued share capital under law is not allowed to exceed the authorised share capital. If a company wish welles to extend the amount of share capital that it is allowed to issue it must pass an appropriate resolution at a general meeting of the shareholders.The authorised and shared issue capital is divided into different types of shares which are Ordinary shares option sharesWith these shares come voting rights to the holder which can give the right to the holder to have their say at the annual general meeting.Ordinary sharesAn ordinary share is the most commonly issued share and carrys with it the main risks and rewards that come with the success of the business. If the business makes a profit the holder of the share will receive a dividend, these share are paid after discernment shares dividends. Also of the company records a loss the share holders will loss part or all of their investment.Many companies when they have made a profit dont pay out all the profit, many keep a percentage as a hold back. This reserve money can be used the next year as a dividend if the company does not make a ample profit, this serves to keep the investor interested and thinking they are getting a return on their shares. When a business goes into solvency the ordinary share holders receive any payments last.Preference sharesA preference share normally carrys a contumacious rate of dividends. The dividends of the preference shares are paid out before the dividends of an ordinary share, although the dividends are only paid if the company makes a profit. If the company goes into solvency the preference share will receive a part of their payment before the ordinary shares.Nominal and market set of sharesThe nominal care for of a share is the face value of the share, shares can be issued for any amount. This nominal value is not normally the same as the market value of the share due to it being traded at different prices constantly.Issue pr iceThis is the price the shares are issued to the shareholders by the company. The issue price is either at a par with the nominal value or supra the nominal value. When the issue of the issue price is above the nominal value it is known as a share bonus.Loans and DebenturesAs well as sell shares to raise capital the business may also be required to take a loan or unsecured bond which can be obtained from the shareholders. With these two methods of increase capital usually comes a improve rate of interest on the amount. This interest is considered a business expense so is placed in the profit and loss account with all the other expenses. If the company goes into insolvency the loan/debenture will be paid off before any shareholders are paid.Trading and Profit and Loss AccountWhen most limited companies are creating their financial statements they are normally the same as that of a sole trader and a partnership. However there are two expenses that are found in a limited companie s profit and loss account but not in any other type of business, these are Directors remuneration (directors salary) this is entered because the directors are employed by the company and thus are an expense to the company Debenture interest this is entered into the companies profit and loss account because it is an expense to the companyThe limited company completes it profit and loss account and finds out the Net profit, an appropriation account is then drawn up below this.Balance SheetThe balance sheet of limited companies are for the most part the same as all other companies balance sheet away from the odd difference in the things that go into the current assets, fixed assets and liabilities. The difference is that the capital section of the balance sheet is alternatively complex due to the different shares that are issued and the various reserves.ReservesA limited company will very rarely disburse all its profits between its shareholders, it will alternatively keep back a c ertain amount as a reserve. There are two types of reserve Capital reserves which are created because not all the capital that has been taken was used for trading Revenue reserves these are the retained profits from the profit and loss accountCapital reservesExamples of capital reserves which cannot be used to fund dividends payments include Revaluation reserve this takes place when a fixed asset is revalued in the balance sheet, this limited review is then placed in a revaluation reserve, it then serves to increase the shareholders investment in the company Share premium account a company may wish to issue extra shares to be available to the general public at a price over that of the nominal price. The nominal value of the shares is excitant signal into the share capital account and the extra money on top of the shares laced into the share premium account.Revenue reservesThis is very often left as the balance of the appropriation account of the profit and loss account, it is most commonly known as the profit and loss account balance. On the other hand they may choose to put this revenue into a separate account of its own. This transfer to and from these accounts will in recorded in the appropriation account.The regulatory textile of accountingWhen talking about the regulatory material of accounting you are simply talking about the rules that are to be followed when preparing final accounts. There are two forms these rules take the form of these are Accounting archetypes Accounting standardsAccounting constructsBelow are the basic accounting inventions that are to be followed when preparing final accounts Business entity Money criterion historic cost Duality materiality Going concern Accruals Consistency managementBusiness entity designThis purpose outlines that the final accounts and records of a business are that of the business and that no personal assets of the owners are included within these records. The main links that are disclosed bet ween the business and the owner(s) is the capital accounts and drawings.Money cadence purposeThis plan means that all items that are within the final accounts are expressed as money, this means all the values can be added together to come up with the net profit, gross profit and so on. The problem with this is that things that cannot be recorded as money such as good management will not be valued and all companies will be seen to be managed the same way, only in time will the good management become apparent.Historical cost conceptThis is an extension of the money measurement concept, it basically means that a transaction should be recorded at the value it was historically recorded or initially recorded, so if a vehicle cost 20,000 at purchase it should be entered for that amount.This concept brings with it advantages which are as follows objective there is a prime document that confirms that this transaction has occurred Objective there are no new valuations of the vehicle wh ich will make it easier to price when it comes to saleThis concept also brings with it disadvantages which are as follows The change of value all items change in value over time and this usage be recorded the value may have went up or down The effects of inflationDuality conceptThis concept ensures that all transactions are entered into the double-entry system twice one on the credit side and one on the debit side.Materiality conceptThis concept sets out that some items within accounts are so low in monetary value there would be no point in recording them separately. most examples of these types of items are listed below The likes of donations to charities, the purchasing of plants for the blot and other small expenses such as these are seen not to justify their own expense account, so they are sort together in a heterogenous expenses account The end of year stocks of unmoving such as motif for printers, paper clips, pens etc are not seen to be material due to the fact they dont put on the business earnings however they are placed within the profit and loss account The low cost fixed expenses such as bins, staplers etc are not classed as capital expenditure, they are instead classified as expenses within the profit and loss account. Technically they should be placed within the fixed assets account of the balance sheet and be depreciated every year of their flavour span, but it would not be worth the effort due to them being inert in that they wouldnt cause any real affect to final figures.What a business will consider material depends really on the size of the particular business, the likes of a large business would find anything under 1,000 immaterial and not worth putting into their own account whereas a small company would consider these items material and have them in their own account.Going concern conceptThis concept is presuming that the business to which the final accounts relate will continue to trade for the foreseeable future. The final a ccounts are prepared on the basis that the business has no determination of significantly down sizing or liquidating its assets. If the business was going to down size and where to sell a purpose construct factory this factory would be a going concern to the business but would be of limited use to other industries for this reason the building would command less value. This instead of being described as a going concern would instead be described as a bygone concern. In a gone concern extra depreciation would be added to the profit and loss account to account for the reduction in fixed assets.Accruals conceptThis concept is concerned with the expenses and revenues being matched so that they will concern the same goods/service and the same time period. In the profit and loss account expenses should always be entered whether they have been paid for or not. This is where the normal of income and expenditure accounting came from. Below are further examples of the accruals concept Debt ors Creditors Depreciation dark debts Provision for bad debts Opening and closing stock adjustments in profit and loss accountConsistency conceptThis concept is concerned that when a company adopts a particular method for accounting they should continue to use that method in a constant fashion. When a business has select a particular practice for accounts they may at times wish to make some changes, this is acceptable as long as there is a good reason for it, this change is to be note on the final accounts to explain what has happened. With the soundbox of the accounts the business can make comparisons between different years.Prudence conceptThis concept is also known as the conservativism in accounting. This concept requires where there is any doubt as to the value of an item report a conservative figure to be entered within the final accounts. Although this does not mean that profits are to be anticipated and should only be recognised if there is a distinct speculation they w ill be realised, as well as this all known liabilities should be provided for. A good example of this execute is the provision for bad debts this is so any debt that maybe written off may be accounted for. The theory behind this concept is that it prevents the business from being to over starry-eyed with its presentation of final accounts.All of the above concepts apply to the final accounts of a sole trader, a partnership and a limited company. With relation to the limited companies the Companies Act 1985 gives legal force to the following concepts Going concern Accruals Consistency PrudenceIf the company does not apply these concepts will receive a qualified report from its auditors.Accounting shopwornsThe framework for accounting is represented by the Statements of Standard Accounting Practice (SSAP) and financial inform Standards (FRS).The Statements of Standard Accounting Practice are no longer issued, but they still come under the control of the Accounting Standards Board . The Accounting Standards Board requires that accountants adhere to all applicable accounting standards and are able to disclose and explain deviations from the standards that may occur. To try and reduce the number of permissible accounting treatments, a number of Statements of Standard Accounting Practice have been replaced by Financial Reporting Standards.The main accounting standards are SSAP 5 Accounting for grade Added evaluate SSAP 9 Stocks and long-term contracts FRS 15 Tangible fixed assets FRS 18 Accounting policiesSSAP 5 Accounting for Value Added TaxVAT is a tax on the supply of goods and services. Business with a turnover of over a certain figure will be registered for VAT.At regular intervals the business that are registered will pay VAT Authorities such as HM Customs and call off on the following The amount of end product tax collected on sales made Less the amount of stimulant tax on goods and services purchasedThe business can claim a give back from the HM C ustoms and Excise discussion section if the input tax is greater than the sidetrack tax. This claim will be made on the difference.A business that is VAT-registered does not normally include the VAT in the income and expenditure of the business whether for capital or revenue reasons.There are goods and services that are exempt from VAT these are things such as the loaning of money and letting of land, VAT cannot be charged by the charge so no output tax is received, they can only clam back an agreed analogy of the input tax that has been pre agreed with the VAT authorities.Irrecoverable VAT occurs when a business that has been registered cannot reclaim VAT on input tax, this means the VAT is entered into the accounts as an expense.A business that is not registered for VAT will include VAT within its input financial statements.SSAP 9 Stocks and long-term contractsThis sets out the broad rule that stock should be valued at cost or, where lower, interchange price.FRS 15 Tangible f ixed assetsThis sets out that a fixed asset has a known economic life and must be depreciated, this doesnt apply to land unless it is either a stone or mine.As long as the depreciation method is acceptable it can be used to spread the cost of a fixed asset systematically over that fixed assets economic life.A depreciation amount is most of the time based on the cost of the fixed asset.FRS 18 Accounting policiesThis standard is to ensure that all material items have the following The particular circumstances of the business accounting policies are fit of the given purpose and give a true and fair view The policies that have been selected by a company are regularly reviewed to ensure they are still appropriate, also when the circumstances change the policies are changed to The information that is disclosed within the financial statements is of sufficient information to enable users to understand the accounting policies that have been adopted and how they have been use