Companies Flashcards
company?
- separate entity for legal purposes
- can continue to exist independently, regardless of who the shareholders are
- right of ownership over its assets and responsibility for settling its own liabilities
founding costs incurred journal?
dr retained earnings (sce)
cr bank/ creditors
managing company?
shareholders elect directors who will manage company on their behalf
directors delegate responsibility to upper management and their officials
company should be managed in accordance with stipulations of Companies Act of 2008, memo of incorporation and additional rules determined by board of directors
memo of incorporation stipulates?
- external powers of characteristics of company e.g. name, authorised share capital
- internal management aspects of company e.g. procedures relating to share issuing, voting rights, etc.
private company?
- name ends with (Proprietary) Limited
- no limit on number of authorised shares
- shares not freely transferable
- shares not offered to public
- at least one shareholder
- financial statements only need to be audited if certain things exceed certain limit (Public Interest Score)
public company?
- name ends with Limited
- no limit on number of authorised shares
- shares freely transferable
- shares offered to public
- at least one shareholder
- financial statements must be audited
advantages of companies?
- exists independent of shareholders
- easy to change owner
- company tax rate of 28% may be less than tax rate for normal person
disadvantages of companies?
-separation between ownership and management may be problematic
- complex to found and dissolve
objective of financial statemens?
to provide info on financial position, performance and cash flows of an entity which may be useful to various users in making economic decisions
stakeholders of financial statements?
shareholders
auditors
management
employees
banks
etc
accounting records?
must be:
- accurate and complete
- in one of country’s official languages
- sufficient to compile financial statements
- available at company’s registered office
annual financial statements must?
- meet FRS
- reflect company’s state of affairs fairly
- show transactions and financial position
- show A, L, I, E in prescribed format
- show date on which financial statements were compiled
- show accounting period that’s applicable
- show whether statements were audited/ reviewed independently
- show name & professional qualifications of person who supervised while statements were drafted
annual report must contain?
- directors’ report
- auditors report
- specific disclosure on transactions with directors and prescribed officers
statement of changes in equity?
reconciliation from opening balance of each class of equity at the beginning of the financial year until the closing balance at the end of the financial year
line items represent each transaction which affects the equity of the company
share capital?
capital of company = raised when investors purchase shares
by means of prospectus and application form made available to general public/ by private invitation to individual investors
share then allocated and issued to successful investors, known as shareholders