Five people want a copy: In March 2026 the accountant finishes Lena's Bakery Ltd's final accounts for 2025: the profit and loss account (3.4.1) and the balance sheet (3.4.2).
Within a week, five people ask to see them: Marco's cousin, the bank, Valley Grain, the tax office and Priti, the head baker. Same two pages, five different questions.
Final accounts are a report on the business. The profit and loss account shows how it did over the year. The balance sheet shows what it owns and owes on the last day of it.
Their purpose is to give the people with a stake in the business (its stakeholders, 1.4.1) the facts they need to make their own decisions: to lend, to invest, to supply, to stay, to tax.
What final accounts are for
A record
A true record of the year's sales, costs, profit, assets and debts. A company must keep one by law, and the tax office works out what it owes from it.
A report to the owners
Marco's cousin owns 200 shares but never works in the bakery. The accounts show him what the directors did with his money (they hold the managers to account).
A basis for decisions
The bank decides whether to lend more, Valley Grain whether to keep giving 30 days to pay, Farida Rahman whether to buy shares.
A plan for the managers
Lena and Marco compare this year with last: which costs grew, whether the new shop paid its way, what the bakery can afford next.
Who can actually read them: A privately held company does not publish its accounts (1.2.3). The bank and Valley Grain see Lena's because the bakery hands them over when it asks for a loan or for credit.
Goldcrust plc is publicly held, so it publishes its accounts every year. Anyone can read them, including Lena.
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Marco's cousin put money into the bakery for 200 shares. He does not bake, sell or manage. Once a year the accounts are how he finds out what his money earned.
Shareholders read three lines first
- The profit.
- The part of it paid out to them.
- The part kept.
| Line in the 2025 accounts | Figure | What a shareholder reads in it |
|---|---|---|
| Profit for the period | $60,000 | Whether the company made money for its owners after every cost, the interest and the tax |
| Dividends | $30,000 | What was paid out to them: Lena $15,000, Marco $10,000, the cousin $5,000 |
| Retained profit | $30,000 | What was kept to grow the business, which should mean more profit and bigger dividends later |
| Retained earnings (balance sheet) | $150,000 | Profit kept over all the years, now in the bakehouse, the ovens and the vans |
The dividend on one share: Shareholders compare dividends share by share, so the size of the company does not get in the way (the dividend per share).
Dividend per share = total dividends ÷ number of shares = $30,000 ÷ 1,200 = $25.
Lena's 600 shares earned 600 × $25 = $15,000. If the dividend per share rises next year, every shareholder gets more for each share they hold.
Every dollar paid out is a dollar the company does not keep (3.2.1). The cousin would like a bigger dividend. Lena would like to keep more: the second deck oven for Mill Lane will cost $45,000 in 2026, and the $30,000 kept in 2025 does not cover it.
So when a business pays a high dividend, there are two sides to comment on.
What it does for the shareholders
- Rewards them for the money they put in
- Makes the shares more attractive, which can lift the share price of a listed company
- Keeps investors loyal and makes it easier to raise money from shareholders again
- Can signal that the directors are confident about profit
What it costs the business
- Less retained profit for new ovens, new shops or new products
- It may have to borrow instead, and pay interest
- In a fast-changing market, less spent on new ideas can leave it behind its rivals
- Shareholders expect the same again, which is hard if profit falls
Would-be owners read the same lines: Before paying $120,000 for 400 new shares, Farida Rahman asks for the bakery's accounts (3.2.2). She looks at the same three lines: is the profit growing, how much is paid out, how much is kept.
At $25 a share, her 400 shares would have earned $10,000 in 2025.
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Three years of Goldcrust: Goldcrust plc publishes its accounts, so its thousands of shareholders can line up the years side by side. One year's dividend says little. Three years show which way it is going (the trend).
| Goldcrust plc | 2023 | 2024 | 2025 |
|---|---|---|---|
| Dividend per share | $0.20 | $0.22 | $0.25 |
| Profit for the period | $100 million | $90 million | $80 million |
| Total dividends (200 million shares) | $40 million | $44 million | $50 million |
Commenting on the trend, step by step
Say what the figures show
The dividend per share rose every year, from $0.20 in 2023 to $0.25 in 2025.
That is a rise of $0.05 on $0.20, which is 25%.
Say what it means for shareholders
A bigger return on every share, three years running. That rewards the owners and can attract new investors to buy Goldcrust's shares.
Bring in the other figure
Profit for the period fell from $100 million to $80 million over the same years. In 2025 Goldcrust paid out $50 million of its $80 million profit.
Judge it
Goldcrust is paying a bigger slice of a shrinking profit. The rising dividend may not last, and only $30 million was kept for new bakeries in 2025.
Use every year you are given: 'The dividend per share went up' uses one fact. 'It rose every year, from $0.20 in 2023 to $0.22 and then $0.25, a rise of 25%' reads all three years.
Numbers alone are not a comment either. Finish with what the trend means for the shareholders or for the business.
The same reading works for Lena's Bakery Ltd next year. If the 2026 accounts show a dividend of $25 a share again while profit rises, the shareholders get the same and the company keeps more for the oven.
Shareholders are not the only readers. The bank, Valley Grain, the tax office and the people who work at the bakery all open the same accounts, and each goes straight to a different line.
| Reader | What they want to know | In Lena's 2025 accounts |
|---|---|---|
| Managers (Lena and Marco, the directors) | Which costs are rising, whether the year's plan worked, what the bakery can afford next | Wages and salaries of $750,000 are almost three-quarters of the $1,035,000 of expenses |
| Employees (Priti, the bakers, the counter staff) | Is my job safe? Can the business afford a pay rise? | A profit of $60,000; 10% of it, $6,000, is shared among the 22 staff (2.4.3) |
| Lenders (the bank) | Can the business keep paying the interest and repay the loan? | $85,000 of profit before interest and tax pays $10,000 of interest more than eight times over; $350,000 of the loan is still to repay |
| Suppliers (Valley Grain) | Will we be paid on time for goods delivered on credit? | It owes $45,000 to creditors, mostly Valley Grain; it has $25,000 in cash and $40,000 coming in from cafés and hotels |
| Government (the tax office) | How much tax does the business owe? | Tax of $15,000 on a profit before tax of $75,000 |
| Customers (the cafés and hotels that buy wholesale) | Will this supplier still be delivering next year? | A profit in 2025 and $30,000 kept in the business suggest it will |
| Competitors (Goldcrust plc) | How is the rival doing? | Cannot see them: a privately held company's accounts are not published |
Two readers, one balance sheet: The bank and Valley Grain can read the same balance sheet and look at different lines.
The bank looks at the long run: profit before interest against the interest, and the $350,000 still owed. Valley Grain looks at the next 30 days: the cash and the money due in against what the bakery owes this month.
When you explain why a stakeholder would want the accounts, name the group, say what it has to decide, and point to the line that answers it. 'The bank wants to know about profit' is vague. 'The bank wants to know it will be repaid, so it looks at whether profit covers the interest' is an answer.
What the accounts cannot tell anyone: They look back. The 2025 accounts show last year, not whether the Station Road shop will work.
And they show only what can be counted in money: not how skilled Priti's bakers are, how loyal the morning queue is, or what customers say about the bread. A careful reader asks about those too.
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How this comes up: A short comment on figures from the accounts, for two marks, in the part of the paper that gives you data.
Two ways it has come
- As a decision: a business paid high dividends. Comment on it.
- As a trend: a chart of the dividend per share for three years. Comment on it.
- Either way, the comment is about what the figures mean for the shareholders and the business.
The two-mark comment
- Say what the figures show, with the numbers from the case: half the profit paid out; the dividend per share up every year.
- Say what it means for the shareholders: a reward, a reason to keep or buy the shares.
- Weigh it with the case: less profit kept for what the business needs next, or a payout that a falling profit may not support.
Describing is not commenting: 'Dividends were $30,000 and retained profit was $30,000' repeats the table. It says nothing about what the decision means.
One side with no link to the case stops at one mark. The second mark needs the case: its figures, its plans, its market.
Comment on Lena's Bakery Ltd's decision to pay half of its 2025 profit to its shareholders as dividends.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.