(224)---SOME IMPORTANT LEGAL REQUIREMENTS IN FINANCIAL STATEMENTS

Some Important Legal Requirements in Financial Statements

• Terminology
  Accounting reference period (ARP), the period by reference to which the financial statements have to be prepared and presented to members. Accounting reference date (ARD), the date on which the Accounting reference period ends. Financial year (FY), the period covered by the statutory profit and loss account, whether or not this is a year.
• Accounting reference dates
  The companies Act introduced some changes to the rules. Ignoring transitional provisions companies must notify the register of companies of their Accounting reference date within nine months of incorporation.
• Accounting reference period
  The first Accounting reference period begins on the date of incorporation and ends on the Accounting reference date, and is a period of more than six months and less than 18 months. Succeeding Accounting reference periods will be for 12 months unless appropriate notice is given of a change of Accounting reference date.
• Financial year
  The financial year of a company will usually be the same as its Accounting reference period. However, to cover special situations, the financial year may begin or end on dates which are not more than seven days before or after the Accounting reference date.

Accounting Records

The companies Act required accounting records to;

1. Be sufficient to show and explain the company’s transactions
2. Disclosure with reasonable accuracy the company’s financial position at any time
3. Enable the directors to ensure that any accounts which they are required to prepare comply with companies Act.

The records must contain, entries from day to day of all sums of money received and expended and matters in respect of which the receipts and expenditure take place, a record of the company’s assets and liabilities, for a trading or merchant company dealing in goods.

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