Companies Flashcards
Directors
People who are appointed by the shareholders to run the company.
Independent auditor (external)
An auditor who expresses an opinion on the financial statements in an auditor’s report but does not work for the company.
Internal auditor
An auditor, who supervises the preparation of the financial statements, is responsible for internal control and is employed by the company.
Shareholders
People who own the company.
South African Revenue Services (SARS)
The government department to whom the company must pay income tax on the profits and VAT when due.
Auditor’s report
This is an opinion given by a qualified person on whether the financial statements are reliable or not
Qualified auditor’s report
When the auditors find the financial statements acceptable EXCEPT for some aspects that need to be changed, fixed or investigated
Unqualified auditor’s report
When the auditors find the financial statements acceptable in ALL respects.
Disclaimer
When the auditors are not prepared to express an opinion on the financial statements (because they are too unreliable).
Balance Sheet
This statement reflects the assets, liabilities and net worth (owners’ equity of the company). Another term for this is ‘Statement of Financial Position’.
Cash Flow Statement
This shows the flow of cash in a company (money coming in and money going out)
Income Statement
This statement shows the profit or loss made from business operations (income and expenses). Another term for this is ‘Statement of Comprehensive Income’
Tax Assessment
This is issued by SARS to confirm the amount of income tax which the company has to pay based on profits.
Authorised Share Capital
The maximum number of shares a company can sell.
Dividends
That portion of the profits (after tax) which has been approved to be shared amongst the shareholders (total dividends = interim + final).
Interim dividends
Dividends that are paid to the shareholders during the year.
Final dividends
Dividends that are declared (recommended) to the shareholders at the end of the financial year.
Income tax
Tax the company pays to SARS on its profits
Issued Share Capital
The number of shares that have actually been sold to shareholders. Use number of issued shares to calculate dividends.
Limited Liability
The liability of the shareholders is limited to their investment in the company (they cannot lose their personal assets).
No par value
There is no value attached to shares until they are issued.
Provisional Tax
Payments made to SARS during the year based on estimated profits (every 6 months).
Retained Income
A portion of the profits after tax that are not paid out to the shareholders in dividends but kept (retained) for future growth of the company.
Issue Price
The price at which shares are issued to the public.
Shareholders earnings
Net profit after tax.
Shareholders for dividends
The amount still owing to shareholders for dividends declared but not yet paid.
Buy back shares
Issued shares that have been repurchased by the company and are retired or cancelled.
Cash Inflow
Money coming into the business. This amount does NOT have brackets. (e.g. sale of shares)
Cash Outflow
Money going out of the business. This amount HAS brackets. (e.g. bought a fixed asset for cash)
