Question

Madge is a sole trader who has decided to form a small proprietary company and move her business into a corporate form. Madge’s business is quite small, with some assets and modest revenue. She has paid tax personally in the past. Madge is now curious as to whether there are any requirements on the small company she is about to register. What are the procedures and reporting requirements on a small proprietary company regarding records, accounts and reports required by the Corporations Act and ASIC?

Answer 1

Solution :

Madge's company is a small company.

All companies are required to keep the following financial records in written form :

1. Statement showing financial position
2. Statement reflecting financial performance
3. Financialrecords

The financial records can be in electronic form - but it must be convertible into a hard copy.

Financial records includes the following :

• invoices
• receipts
• cheques
• books of prime entry
• working papers and other financial documents.

As Section per the 286 of the Corporations Act, the financial records are to be kept for a period of 7 years after the date the transaction is complete.

The following small companies are required to lodge financial reports under the Act :

• small proprietary companies that are foreign-controlled
• small proprietary companies that have one or more crowd-sourced funding shareholders at any time during the year
• small proprietary companies that we direct to prepare financial reports
• small proprietary companies that shareholders direct to prepare a financial report
• small companies limited by guarantee subject to a member direction under section 294A of the Corporations Act.

The following financial reports are required to be lodged to the AISC :

1) Statement reflecting the financial position

2) Statement of Profit and Loss

3) Statement of cash flows

4) Statement showing changes in equity

5) If the company is holding AFS licence, it must also lodge the auditor's report.

The financial reports must be in compliance with the accounting standards.