Limited Liability Companies

Question 1

What is a statement of changes in Equity

Answer 1

Unlike partnership accounts which show an appropriation accounts. Companies show statement of equities. This shows:
A) Retained profit
B) Distributions of equity eg dividends and contributions of equity share issues
C) A reconciliation between the opeing and closing carrying amount of each components of the equity ie share capital and reserves.
Taxation is shown as a deduction when arriving at retained profits

Question 2

Which of the following would not appear in a statement of Equity

a) Interim Dividends
b) Transfer to revaluation reserve
c) Transfer to General reserve
d) Proposed taxation

Answer 2

D) Proposed Taxation

Question 3

Name some characteristics of a limited company

Answer 3

1. Members are not entitled to share in the management
2. Individuality of the members is lost in the new entity
3. The minimum number of members in the limited company is two there is no maximum
4. Members as such have no power to bind the company
5. The liability of a member is limited to the amount of his/her shares or the amount that he/she originally agreed to
6. The accounts must be audited periodically
7. Capital must be kept quite distinct from the profits and no capital can be withdrawn except under special circumstances provided for by the companies act 1985
8. The company continues to exist regardless of changes in its members by reason of death or transfer of shares until it is wound up or struck off the register

Question 4

Define called up capital

Answer 4

Where only part of the amount payable on each issued share has been asked for, the total amount asked for on all issued shares is known as the called up capital
Often members are not required to pay the full value of their shares immediately, the company may require only some of the capital at the time but the members remain reliable for the rest of the value of the shares of the company requires it, however by the companies act 1985 at least 25% and on the value of the shares must be paid an issue

Question 5

Define paid up capital

Answer 5

Amount of called up capital which has actually been paid by the members of the company o the shares held by them
This term also include capital that has been fully or partially paid for by a consideration of other things other than cash e.g. the promoters of the company may be allotted shares in consideration for their services

Question 6

What is calls in the arrear

Answer 6

The difference between the amount of called up capital and paid up capital

Question 7

What is uncalled capital

Answer 7

The nominal amount of the issued capital which has not been called up by the company

Question 8

What is issued capital

Answer 8

That portion of the authorised capital which has not been offered to and taken up by the public

Question 9

What is reserved capital

Answer 9

That portion of the uncalled capital which by special resolution has been expressly reserved to be called up only in the event of the company being wound up