Uk Accounting

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The U.K has very strict guidelines to follow when it comes to the financial statements and disclosure requirements. They are much stricter than those of the U.S. “They have four formats for the profit and loss accounts—a vertical and horizontal layout for each of the two forms. Form one is geared toward trading companies and arranges the accounts on an operational basis. Form two is for manufacturing companies and arranges the accounts according to their nature. The balance sheet has two formats and is laid out with specific references to Roman and Arabic numerals. The law strictly spells out the exact format to be used for the U.K. statements. The actual statements required by law for public firms in the U.K. closely parallel the U.S. requirements and include the profit and loss statement, the balance sheet, the auditors’ report, and the directors’ report” (Doost, & Ligon, n.d.).

As far as accounting procedures and systems go, there are a few differences that the United Kingdom does. Tangible assets are measured at cost. Also, “the treatment of goodwill is different from the American accounting system. In the U.K., companies are allowed to directly write off the goodwill against reserved rather that to capitalize and amortize against it” (British and American accounting systems, 2011). The inventory methods also vary. In the U.K., the last-in-first-out method is not allowed. They also have a lower cost and realizable value. Every company that makes more than one million pounds is bound to be audited. This is stated in the Britain Companies Act. The income statement financial record used in the U.S. is recognized as a profit or loss account in the U.K.

References

AICPA. (2011). Retrieved on September 7, 2011 fromwww.aicpa.org

British and American accounting systems. (2009). Retrieved on September 7, 2011 from

http://www.accountingschoolsonline.net/british-vs-american-accounting-system.html

Chatfield, M. History of accounting thought. (1977). Huntington, NY.

Doost, R. K., & Ligon, K. M. Business readings. (n.d.). Retrieved on September 7, 2011 from

http://college.cengage.com/accounting/resources/students/readings/38-doost.html

ICAEW. (2011). Retrieved on September 7, 2011 from www.icaew.com

Parker, R. H. The development of the accountancy profession in britain to the early twentieth

century. (1986). Academy of Accounting Historians.