Company Accounts Flashcards
What are preliminary/issue expenses?
These include legal and other expenses (printing etc.) incurred when a company is formed.
What is authorised share equity?
The authorised share equity of a company is the maximum amount of share equity that the company is permitted by its constitutional documents to issue (sell) to shareholders.
What is issued share equity?
This is the amount and types of shares which have been issued (sold) to the public.
What is share equity?
There are 2 types of shares: Ordinary and Preference. The purchase of these will represent ownership of a business.
What are ordinary shares?
These types of shares allow shareholders to attend and vote at all shareholder meetings held by the company. The dividends paid to shareholders will vary and depend on the profits made by the company.
What are preference shares?
Unlike ordinary shares these generally carry no voting rights. Preference shareholders are paid a fixed rate of dividend.
What is share premium?
This is a reserve which will exist when the company sells shares at a later date for a higher price than the original selling price.
What is a bonus issue?
This is when current shareholders are given free shares by the company.
What is a rights issue?
This is a method of raising finance by issuing shared to existing shareholders in proportion to existing shareholding.
What are debentures?
These are long term loans to a plc. They are bought by investors who wish to lend to a company and in return receive an annual fixed interest payment.
What are provisions?
This is an amount of profit retained in the business to meet an expected loss.
What are reserves?
These are not charges against profits (expenses) but an appropriation of profits.
What is a memorandum of association?
This is a document that deals with the external regulations for the management of the proposed company.
What does a memorandum of association include?
The name of the company
Address in the UK of the Registered Office
Statement that the liability of its members is limited
Details of the intended amount of share equity and types of shares e.g. Preference/ordinary
A statement of its objectives
What are articles of association?
This document deals with the internal regulations for management of the proposed company and its subordinate to and controlled by the Memorandum of Association.
