Professional Issues in IT, 3rd Edition

6 FINANCIAL ACCOUNTING

After studying this chapter, you should understand the nature and purpose of the three most important financial elements of a company’s annual report:

• the balance sheet;
• the profit and loss account;
• the cash flow statement.

You should also be able to interpret them in straightforward cases.

6.1 DISCLOSURE REQUIREMENTS

The proprietors of limited liability companies are privileged, precisely because their liability is limited – they can lose no more than the money they invested in the company. In return for this privilege, the law requires that, every year, the company produces an annual report, which must be filed at Companies House. An annual report contains information about a company and its activities during the ...