Owners Equity

Question 1

Definition of owners equity according to the framework?

Answer 1

Residual interest in the assets of a company after deducting all its liabilities.

Question 2

Residual interest?

Answer 2

OE = A - L

Question 3

When does an instrument qualify as equity?

Answer 3

When there is no obligation to repay capital and/or a dividend/return.

Question 4

When an instrument does have an obligation to repay capital and/or a dividend/return what should it be measured as?

Answer 4

A financial liability.

Question 5

Journals for payment of dividends from instruments classified as equity?

Answer 5

Dr Dividend paid (SOCE)
Cr Shareholders for dividends (SFP)

Dr Shareholders for dividends (SFP)
Cr Bank (SFP)

Question 6

Journals for payment of dividends from instruments classified as Financial liabilities?

Answer 6

Dr Finance costs/interest (P/L)
Cr Bank (SFP)

Question 7

Journals for payment of dividends from instruments classified as equity?

Answer 7

J

Question 8

Journals for payment of dividends from instruments classified as equity?

Answer 8

J

Question 9

Journals for payment of dividends from instruments classified as equity?

Answer 9

J

Question 10

Can an entity accept an over subscription in terms of a share offer?

Answer 10

Yes, as long as the issued shares < authorised shares.

Question 11

What is an underwriters fee?

Answer 11

A % commission on the total shares issued.

% * price per share * number of shares issued