Chapter 4: Accounting For Limited Companies Part 1 Flashcards
What are the primary components of stockholder equity?
Paid in Capital
Retained Earnings
Treasury Stock
What is the Treasury Stock?
Repurchased stock from shareholders
What is a preference share?
Is a hybrid between bond and security
What are the componants of Shareholder equity in a limited company?
Limited company shareholder equity is comprised of: Invested Capital Retained Earnings Share Premium Other Reserves
What are retained earnings?
Retained earnings (RE) is the amount of net income left over for the business after it has paid out dividends to its shareholders.
Where are dividends paid from?
Divideds are paid from revenue reserves
What is the main reason for a parent or holding company to operate in the form of groups
Each subsidary of the business has its own limited liability, therfore, if one subset of the groups goes into finacial difficuties, it does not effect the other companies in the group.
Define “goodwill arising on consolidation”
Goodwill arising on the statement of finacial position is the eccess over the fair value paid by a parent company upon puchasesing majority shares of a newly aquired subsidary company
In a limited liability company, what do shareholders limit their losses to?
What they had paid, or had agreed to pay, for their shares
What is the main source of new long-term finance for limited companies
Retained profit
