We were looking at Understanding our Accounts and started by having a look at the history of accounts which highlighted four purposes:
- to allow business owners to manage their businesses effectively
- to provide a basis for taxation
- to give investors information on the return the businesses they were invested in
- to provide evidence of meeting regulations concerning Limited Companies
We then looked through the elements of accounts – Profit and Loss, Balance Sheet, the Notes and Reports, providing the basics in terms of what each figure meant. This lead to a discussion of Company Directors responsibilities which can be summarised by a duty to present a ‘true and fair’ picture of their business.
Finally we set aside the reporting and taxation functions of accounts to look at what they told us about the performance of the business including:
- Return on Investment