Company Account Flashcards
A company
Is a body corporate formed and registered under the Companies Act 1963, Act 179 or an existing company
Section 5 of Act 179
Prohibition of partnership of more than 20 members
Characteristics of a company
- Separate legal entity
- Separation of management and ownership
- Perpetual succession
- Transferability of interest
Formation of companies
- Compliance with the provisions in Act 179 and satisfying the registrar general.
- Certificate of Incorporation issued to the Promoters after meeting the minimum capital requirement
- Certificate of Commencement of Business will be issued to start trading
- Regulations of the company
Company limited by shares
This is a company having the liability of its members limited to the amount, if any, unpaid on the shares respectively held by them.
Company limited by guarantee
This is a company having the liability of its members limited to the amount of money the members may respectively undertake to contribute to the assets of the company in the event of it being wound up.
Private company
- Restricts the rights to transfer shares
- Limits the total number of its members and holders to 50. Excluding employees and formers employees
- Prohibited to make any invitation to the public to acquire shares or debtor of the company
- Prohibited to make any invitation to the public to deposit money for fixed periods or payable at call.
Accounting and audit requirements of a company (s. 123- 136)
- Keeping of books of account
- Circulation of profit and loss account, Statement of Financial Position and reports
- Profit and loss account
- Statement of financial position
- Group accounts
- Particulars of Directors emoluments and pensions
- Particulars of amount due from officers
- Signing and publication of accounts
- Directors’ report
- Auditors’ report
- Appointment and remuneration of auditors
- Removal of auditors
- Duties and powers of auditors
[T/F] Shares in Ghana have no par value
True
Shares
Represent right of ownership in a company
Par value of share
The face value or the fixed amount registered of a share
Share premium
Where a share is issued above par value
Share discount
A share issued below par value
Preference shares
Are those shares on which fixed and specified amounts are paid to the holder as dividend, on redemption and in winding up.
Ordinary shares/ Equity shares
Shares which entitle the holders to a residue of the assets when the dividend of fixed preference shareholders has been determined.
Authorized capital (registered capital or nominal capital)
The total of share capital which the company is allowed to issue to shareholders.
Issued share capital
Total share capital actually issued to shareholders
Called-up capital
The total amount asked for on all issued shares.
Uncalled capital
Total amount which is to be received in the future relating to issued share capital, but which has not yet been asked for
Unpaid capital/ call in arrears
Total amount for which payment has been asked for but has not yet been paid by shareholders
Paid-up capital
Total amount of share capital which has been paid for by shareholders
Subscribed capital
Proportion of issued share capital that has actually been taken up by shareholders
Unsubscribed capital
Portion of issued share capital that has not been taken up
Forms of issuing shares
- Initial public offer (IPO)
- Private placement
- Capitalization/ Bonus/ Scrip issue
- Rights issue
Private placement
Sale of share capital to private investors without the use of public market exchanges.
Capitalization/ Bonus/ Scrip issue
Monies in a company’s reserve is converted into capital and then distributed to shareholders as new shares pro rata to their existing shareholdings.
Rights issue
Shares are issued to existing shareholders in proportion to their current shareholdings, respecting their pre-emption rights and usually at a lower price than current share price of the company
Pre-emption rights
The rights of shareholders to be offered any new issue of shares before the shares are offered to non-shareholders
Stated capital (par value)
Is the aggregate par value of all shares outstanding.
Treasury shares.
They are shares which a company has bought, acquired, redeemed or forfeited and are available for reissue
Preference shareholders can only vote under the following conditions
- When preference dividends are in arrears
- When a resolution which may vary the right attached to their shares are to be passed
- When the resolution for the removal of an auditor or the appointment of an auditor to replace the existing one is to be passed
- When the resolution of winding up is to be passed
Types of preference shares
- Cumulative preference shares
- Non-cumulative preference shares
- Participating preference shares
- Redeemable preference shares
- Irredeemable preference shares.
Redeemable preference shares
Shares which are redeemed (bought back) on the expiry of a fixed period of time
Irredeemable shares
Shares which redeemed (bought back) only at the time of winding up of the company
Participating preference shares
Holders have the right to participate in the profits remai9after equity shareholders have been paid dividend
Cumulative preference share
A preference share whose annual fixed-rate dividend, if it cannot be paid in any year, accrues until it can.
Procedure for issuance of shares
- Invitation to the Public to apply for shares
- Application (offer from the public to the company accompanied by cash from the public)
- Allotment of shares (acceptance or rejection by the company)
- Calls for arrears on share values
- Forfeiture of shares
If shares are obtained for cash only
Purchase
If shares are obtained for cash or a consideration other than cash or for no consideration
Acquisition
Share deals account
- When shares are reissued, the proceeds are credited to this account
- When the company redeems or acquires its own shares, the transfer from Income Surplus account is also credited to this account.
- All expenses incurred in the redemption and acquisition of shares are charged to this account.
The reserve that prevents the company’s stated capital from reducing
Share deals account/ Capital redemption account
Components of owner’s equity
- Stated capital
- Share deals account
- Income surplus
- Capital surplus
A company can only pay dividend to shareholders if;
- After such payment the company will be able to pay its debts as they are due
- The amount of such payment does not exceed the hitherto income surplus of the company
Dividend payment could be
- Cash or non-cash
2. Interim or/and proposed
Interim dividend
A dividend payment made before a company’s AGM and the release of final financial statements.
Proposed dividend
The dividend proposed by the board of directors at the AGM
Non-cash dividend
- Stock repurchase
- Stock split
- Stock dividend
