Bowen Pty Ltd is a small proprietary company with seven directors.Four of the seven directors own 75% of the ordinary shares and the remaining shares are owned by family members of the directors.The company also has 15 trade creditors and an open line of credit with one state bank.Is Bowen Pty Ltd a reporting entity and hence required to prepare general-purpose financial reports?
A)Yes,because dependent users of exist.
B)Yes,because there are trade creditors who are external users.
C)No,because it is a small proprietary firm.
D)No,because there are no obvious users who are unable to command the preparation of information from the entity.
E)None of the given answers.

Question

Quizplus · Accepted Answer

The determination of whether Bowen Pty Ltd is a reporting entity and hence required to prepare general-purpose financial reports depends on the specific accounting standards and regulations applicable in the jurisdiction where the company operates. Generally, the concept of a reporting entity is based on the assessment of whether there are users who rely on the company's financial statements to make economic decisions and who are not in a position to demand custom reports tailored to their needs.In many jurisdictions, small proprietary companies are not required to prepare general-purpose financial reports if they meet certain size criteria (e.g., revenue, assets, number of employees) and if they do not have external users who are dependent on general-purpose financial reports for information. 
Given the information provided:
- Bowen Pty Ltd is a small proprietary company.
- Four of the seven directors own 75% of the ordinary shares, and the remaining shares are owned by family members of the directors, which suggests that the company is closely held.
- The company has 15 trade creditors and an open line of credit with one state bank, which indicates that there are external parties with a financial interest in the company.
Based on these points, the most relevant considerations are whether the trade creditors and the bank rely on general-purpose financial reports to make decisions and whether they can command the preparation of reports tailored to their needs.
If the trade creditors and the bank are considered to be users who depend on general-purpose financial reports and cannot command tailored reports, then the company might be considered a reporting entity. However, if these parties have the ability to request specific financial information directly from the company due to their relationship or contractual agreements, then the company may not be considered a reporting entity.
Without specific details on the financial reporting framework and the capacity of the trade creditors and the bank to demand information, it is difficult to provide a definitive answer. However, based on the information given and typical standards:
Answer 4 ("No, because there are no obvious users who are unable to command the preparation of information from the entity") could be the most likely correct answer, assuming that the trade creditors and the bank can obtain the financial information they need without relying on general-purpose financial reports.
It is important to consult the relevant accounting standards and possibly seek professional advice to determine the reporting requirements for Bowen Pty Ltd in the specific legal and regulatory context in which it operates.

Bowen Pty Ltd Is a Small Proprietary Company with Seven