Chapter 12: Organising, share transactions & Equity Flashcards
Issuing Shares Shareholders rights
Vote, Dividend, liquidation, preemption
Difference of Ordinary shares vs Preference shares
Ordinary shares: common stock
Preference shares:
- receive dividend first
- seniority -> liquidation priority
Issuing shares without par value (account)
Dr: Cash (A+)
Cr: Share capital (E+)
Issuing shares with par value (account)
Dr: cash (A+)
Cr: Share capital (E+), Share Premium (E+)
Reacquiring shares
Treasury share and outstanding debt ( issued shares- treasury share)
Accounting for treasury share
Dr: Treasury shares (E-)
Cr: Cash (A-)
Resale of Treasury Shares at a higher Price
Dr: Cash (A+)
Cr: treasury shares (E+), Share premium (E+)
Resale Treasury shares at a lower Price
Dr: Cash (A+), Share Premium (E-)
Cr: Treasury Shares (E+)
What is a dividend?
reward for shareholders
Different forms of dividends
- Cash, Property, SCRIP, Shares
Entry at declaration date (dividend)
Dr: Retained Earnings (E-)
Cr: Dividend Payable (L+)
Entry at Payment date (Dividend)
Dr: Dividends Payable (L-)
Cr: Cash (A-)
What is Shares Split
like a share dividend but involves issuance of additional shares to shareholders
What is Auditing?
the examination of various books of accounts by an auditor followed by physical checking of inventory to make sure that all departments are following documented system of recording transactions
Why is Auditing existing?
- Provides credibility
- Gives shareholders confidence that the accounts are true & fair
