Limited Companies

Question 1

Define limited company

Answer 1

Legal entity which is separate from its shareholders
Capital is divided into units known as shares
Profits are distributed to members in the form of dividends

Question 2

Define issued capital

Answer 2

Amount of capital issued to a business

Question 3

Define called up capital

Answer 3

Part of the issued share capital for which payment has been requested

Question 4

Define paid up capital

Answer 4

Part which has been called up; the company has received payment

Question 5

Define authorised capital

Answer 5

The maximum amount of shares that a business can give

Question 6

Define debenture

Answer 6

Long term loan (non-current liability) which has a fixed rate of interest payable irrespective if the company made a profit

Question 7

Describe ordinary shares

Answer 7

Owners of the company
Have voting rights
Paid out last in case of liquidation
Variable dividend

Question 8

Define preference shares

Answer 8

Not owners
No voting rights
Paid out before ordinary shareholders
Fixed rate of dividends

Question 9

What is the layout of the statement of financial position of a limited company?

Answer 9

Assets (same as sole trader)

Total assets

Equity and liabilities
Equity
Ordinary share capital
General reserve
Retained earnings

Liabilities (same as sole trader)

Total equity + liabilities