LIMITED COMPANIES
A limited company is an organisation that you can set up to run your business - it's responsible in its own right for everything it does and its finances are separate to the owner's personal finances.
Shareholders are not personally responsible for the company's debts. (Limited liability)
AUTHORISED SHARE CAPITAL
The maximum amount of capital that can be raised
ISSUED SHARE CAPITAL
The capital that is actually raised
ORDINARY SHARES - normal
The amount of dividend will depend upon how much profit they company made
They have voting right
PREFERENCE SHARES - VIP, important
The amount of dividend is a fixed percentage of the amount invested.
They are the one who receive their dividend frist
They do not normally have a voting right
DEBENTURES
A form of a loan
It has a fixed rate of interest which is treated as an expense
If a company is to be wound up, Debentures holders are repaid first, then Preference shareholders and then Ordinary shareholders
CALLED - UP SHARE CAPITAL
The installments that are due
When a company issues shares, they might dicided that the full amount should be paid immidiately.
Shareholders can be asked to pay for shares in installements
PIAD - UP SHARE CAPITAL
The amount actually received from the shareholders.
THE INCOME STATEMENT is similar of a sole trader one. However, additional expenses will be included
CALCULATING ;
- DIVIDEND PAYMENT
It always based on the norminal value of issued share capital
It can be expressed as a % of the issued share capital or as an amount / share
- PREFERENCE SHARE DIVIDENDS
A company's authorised share capital includes 150,000 8% preference shares of $1 each, the company has issued 100,000 of these
The annual dividend on preference shares is :
8% x issued capital ($100,000) = $8,000
- ORDINARY SHARE DIVIDENDS
A company's authorised share capital includes 800,000 shares of $1 each. The company issued half of these. The directors announced share dividend of 10%
The ordinary share dividend is :
10% x issued capital ($400,000) = $40,000
Dividends paid are shown in the appropriation account
Retained earnings is a retained profit which it can be saved to finance futuer expansion or pay for future dividends
THE BALANCE SHEET resembles that of a sole trader or partnership. However, there are some important differences:
- Current liabilities should include proposed dividends (going to pay)
- Non-Current liabilities include Debentures
- The capital section will show details of issued capital and undistributed profits
