Summary
Summary P1 UNIT 6
- Institution
- Pearson (PEARSON)
Summary of 5 pages for the course Unit 6 - Financial Accounting at PEARSON (P1 UNIT 6)
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Unit 6P1
Courtney Lowes
Companies Act (1985):
The companies act is the legislation that governs limited companies throughout the United
Kingdom. Within this act all companies must annually produce a report which includes detailed
information about the activities within the business. Furthermore it must allow shareholders to
know the information that they will want to know when they are backing the business, they
should be aware of the material changes of their share capital within the business and the
activities that they are doing in the community must be stated.
The companies act also means that the businesses that are within it must produce financial
statements for their business in a set period to show all of their assets, liabilities, inflows and
outflows of the business. These statements should be produced under guidelines so they are in
a standard format and have good presentation so they can be clearly read.
A business will also have to publish an auditor’s report where they will show all the work that
their auditors have done within the business. This should be completed by auditor standards
and they should ensure that their opinions are not biased and comply with the act fully.
The Picnic Basket would not qualify for being under this act as they are not a limited company
so therefore the legislation would not affect them. However if they were considering becoming
a limited company then they would have to consider the legislation and take it into account
before making a final decision.
Partnership Act (1890):
A partnership will be formed when 2-20 people decide to come together to form a business
with the intention of the profits and liabilities being shared between them. A partnership will
be unincorporated and they will be governed as a partnership even if they don’t intentionally
want to be.
The partnership act can be seen as too vague and many businesses would say that they do not
find it the most useful as the profits and losses would be shared within a business, despite the
amount of time or capital was put into the business by the members of the partnership. One of
the partners is also not able to retire as if they did then the partnership would come apart and
the assets would have to be divided up. The partnership act states that a new partnership can
be formed within the business with the existing owner but it could potentially be very time
consuming and expensive to go through.
A partnership is often considered easy and less time consuming to form than a limited company
would be as it isn’t as professional and formal and the people working together will already
have a working relationship set up. A partnership can be made by word or it can be in writing
and can be ceased with less complications too it which means that in a partnership you will
have more freedom. The partnership act also makes the partners in the business held
personally responsible for their liabilities as it is unlimited even if the business is dissolved, and
the profits and losses would be divided equally unless the partners agree on another way of
sharing it.
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