Company informationJohn Smith and Sons Limited is a private company limited by shares incorporated in England and Wales.The registered office is The Airfield, Dalton, Thirsk, North Yorkshire, YO7 3HE.1.1 Accounting conventionThese financial statements have been prepared in accordance with FRS 102 “The Financial ReportingStandard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of theCompanies Act 2006 as applicable to companies subject to the small companies regime. The disclosurerequirements of section 1A of FRS 102 have been applied other than where additional disclosure isrequired to show a true and fair view.The financial statements are prepared in sterling , which is the functional currency of the company.Monetary a mounts in these financial statements are rounded to the nearest £.The financial statements have been prepared under the historical cost convention. The principalaccounting policies adopted are set out below.1.2 Going concernThe financial statements have been prepared on the basis of going concern despite the deficiency in netcurrent assets. The company is entirely dependent upon the support of the bank, directors andshareholders, The directors and shareholders have confirmed that they will continue to support thecompany for the foreseeable future.1.5 Impairment of fixed assetsAt each reporting period end date, the company reviews the carrying amounts of its tangible assets todetermine whether there is any indication that those assets have suffered an impairment loss. If any suchindication exists, the recoverable amount of the asset is estimated in order to determine the extent of theimpairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.1.6 StocksStocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Costcomprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.1.7 Cash at bank and in handCash at bank and in hand are basic financial assets and include cash in hand, deposits held at call withbanks, other short-term liquid investments with original maturities of three months or less, and bankoverdrafts. Bank overdrafts are shown within borrowings in current liabilities.1.8 Financial instrumentsDebtors and creditors with no stated interest rate and receivable or payable within one year are recordedat transaction price. Any losses arising from impairment are recognised in the profit and loss account inother administrative expenses.Basic financial assetsBasic financial assets, which include debtors and cash and bank balances, are initially measured attransaction price including transaction costs and are subsequently carried at amortised cost using theeffective interest method unless the arrangement constitutes a financing transaction, where the transactionis measured at the present value of the future receipts discounted at a market rate of interest. Financialassets classified as receivable within one year are not amortised.Basic financial liabilitiesBasic financial liabilities, including creditors, shareholder loans are initially recognised at transaction priceunless the arrangement constitutes a financing transaction, where the debt instrument is measured at thepresent value of the future paymen ts discounted at a market rate of interest. Financial liabilities classifiedas payable within one year are not amortised.Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary courseof business from suppliers. A m ounts payable are classified as current liabilities if payment is due withinone year or less.1.9 Retirement benefitsPayments to defined contribution retirement benefit schemes are charged as an expense as they fall due.1.10 LeasesLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risksand rewards of ownership to the lessees. All other leases are classified as operating leases.Assets held under finance leases are recognised as assets at the lower of the assets fair value at the dateof inception and the present value of the minimum lease payments. The related liability is included in thebalance sheet as a finance lease obligation. Lease payments are treated as consisting of capital andinterest elements. The interest is charged to the profit and loss account so as to produce a constantperiodic rate of interest on the remaining balance of the liability.Rentals payable under operating leases, including any lease incentives received, are charged to incomeon a straight line basis over the term of the relevant lease .